CSCP Inventory Management 1

Question 1

The Economic Order Quantity (EOQ) model minimizes the sum of which two costs?

Accepted Answer

Ordering costs and holding (carrying) costs

Answer

Purchase price and transportation costs

Answer

Stockout costs and obsolescence costs

Answer

Setup costs and labor costs

Question 2

Which inventory classification method segments items into A, B, and C categories based on annual dollar usage?

Accepted Answer

ABC analysis (Pareto analysis)

Answer

XYZ analysis

Answer

Economic order quantity

Answer

Safety stock analysis

Question 3

Safety stock is held primarily to protect against:

Accepted Answer

Variability in demand and supply lead time uncertainty

Answer

Seasonal demand peaks

Answer

Price increases from suppliers

Answer

Production machine breakdowns

Question 4

What is the 'reorder point' (ROP) in inventory management?

Accepted Answer

The inventory level at which a replenishment order should be placed to avoid a stockout

Answer

The maximum inventory level allowed in the warehouse

Answer

The minimum order quantity required by a supplier

Answer

The point at which excess inventory should be returned to the supplier

Question 5

Which inventory valuation method assumes that the most recently purchased items are sold first?

Accepted Answer

LIFO (Last In, First Out)

Answer

FIFO (First In, First Out)

Answer

Weighted average cost

Answer

Specific identification

Question 6

Cycle counting is an inventory accuracy technique that involves:

Accepted Answer

Counting a subset of inventory on a rotating basis throughout the year rather than one annual physical count

Answer

Counting inventory at the end of each production cycle

Answer

Tracking inventory movements through each stage of the supply chain

Answer

Auditing supplier inventory levels monthly