CPT Inventory Management & Supply Chain 1 — Questions and Answers
Question 1: What does 'JIT' stand for in manufacturing inventory management?
- Just-In-Transit
- Job In Time
- Just-In-Time (Correct answer)
- Job Initiation Technology
Correct answer: Just-In-Time
JIT (Just-In-Time) is an inventory strategy that minimizes waste by receiving goods only as they are needed in production.
Question 2: Which inventory review system places replenishment orders when stock falls to a predetermined reorder point?
- Periodic review system
- Continuous review system (Correct answer)
- ABC analysis system
- LIFO system
Correct answer: Continuous review system
A continuous review (perpetual) system constantly monitors stock levels and triggers replenishment orders when inventory reaches the reorder point.
Question 3: In supply chain management, 'lead time' refers to:
- Time a manager spends supervising workers
- Time to complete a quality inspection
- Time between placing an order and receiving it (Correct answer)
- Time to prepare a production schedule
Correct answer: Time between placing an order and receiving it
Lead time is the elapsed time from when an order is placed until the ordered items are received and available for use.
Question 4: Which inventory valuation method assumes the first items purchased are the first items sold or used?
- LIFO
- Weighted Average
- Specific Identification
- FIFO (Correct answer)
Correct answer: FIFO
FIFO (First-In, First-Out) assumes that the oldest inventory is consumed first, which matches the natural flow of most perishable goods.
Question 5: What is 'safety stock' primarily maintained to address?
- Defective products found during inspection
- Regulatory compliance requirements
- Unexpected demand increases or supply delays (Correct answer)
- Reserved stock for preferred customers
Correct answer: Unexpected demand increases or supply delays
Safety stock is extra inventory held as a buffer to prevent stockouts caused by unexpected spikes in demand or delays in replenishment.
Question 6: ABC analysis in inventory management categorizes items primarily by:
- Alphabetical order for easy retrieval
- Physical size and storage requirements
- Supplier location and delivery distance
- Value and usage frequency to prioritize management effort (Correct answer)
Correct answer: Value and usage frequency to prioritize management effort
ABC analysis divides inventory into three tiers—A (high value/impact), B (moderate), C (low)—to focus control efforts where they matter most.
Question 7: Economic Order Quantity (EOQ) is the order quantity that:
- Equals average monthly demand
- Minimizes total inventory ordering and holding costs (Correct answer)
- Matches the supplier's minimum order requirement
- Equals the maximum warehouse capacity
Correct answer: Minimizes total inventory ordering and holding costs
EOQ calculates the optimal order size that balances ordering costs against holding costs to minimize total inventory expense.
CPT Inventory Management & Supply Chain 1
What does 'JIT' stand for in manufacturing inventory management?