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

EOQ finds the order quantity that minimizes the total of ordering costs (cost per order) and holding costs (cost to store inventory).

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

ABC analysis applies the Pareto principle: A items (~20% of SKUs) typically represent ~80% of annual dollar usage and receive the most management attention.

Question 3

Safety stock is held primarily to protect against:

Accepted Answer

Variability in demand and supply lead time uncertainty

Answer

Safety stock acts as a buffer against unpredictable fluctuations in customer demand and variability in supplier replenishment lead times.

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 ROP is calculated as average demand during lead time plus safety stock, triggering an order before inventory is depleted.

Question 5

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

Accepted Answer

LIFO (Last In, First Out)

Answer

LIFO assumes the newest inventory is consumed first, which in rising price environments results in higher COGS and lower ending inventory value.

CSCP - Certified Supply Chain Professional Practice Test

CSCP - Certified Supply Chain Professional Practice Test

CSCP Inventory Management 1