CPPB Inventory Management 1

Question 1

Which inventory valuation method assumes that the most recently purchased items are the first to be used or sold?

Accepted Answer

Last In, First Out (LIFO)

Answer

LIFO (Last In, First Out) assumes the most recently acquired items are consumed or sold first, which affects cost reporting and taxes.

Question 2

The Economic Order Quantity (EOQ) model is used to determine which of the following?

Accepted Answer

The optimal order quantity that minimizes total inventory costs

Answer

EOQ calculates the order quantity that minimizes the combined costs of ordering and holding inventory.

Question 3

In public procurement, a 'stockout' occurs when:

Accepted Answer

Demand cannot be met due to insufficient inventory on hand

Answer

A stockout happens when current inventory is depleted and cannot fulfill a request, disrupting agency operations.

Question 4

ABC analysis in inventory management classifies items primarily based on:

Accepted Answer

Annual consumption value

Answer

ABC analysis ranks items by their annual consumption value so that high-value (A) items receive the most management attention.

Question 5

What is the primary purpose of safety stock in a public agency's inventory system?

Accepted Answer

To serve as a buffer against unexpected demand or supply delays

Answer

Safety stock is maintained as a cushion to prevent stockouts caused by demand variability or longer-than-expected lead times.

CPPB - Certified Professional Public Buyer Practice Test