CVPM Inventory and Cost Control 3 — Questions and Answers
Question 1: A practice orders 200 units of flea prevention monthly at $8 each. Holding cost is $0.50/unit/month and ordering cost is $25/order. What is the EOQ?
- 100 units
- 141 units (Correct answer)
- 200 units
- 250 units
Correct answer: 141 units
EOQ = √(2 × 200 × $25 / $0.50) = √(20,000) ≈ 141 units.
Question 2: Which of the following best describes 'dead stock' in a veterinary inventory context?
- Controlled substances pending DEA audit
- Items that have not sold within a defined period and are unlikely to sell (Correct answer)
- Products returned by clients for disposal
- Expired items already removed from shelves
Correct answer: Items that have not sold within a defined period and are unlikely to sell
Dead stock refers to inventory that has remained unsold for an extended period and has little prospect of future sale.
Question 3: A practice's average inventory value is $40,000 and annual COGS is $320,000. What is the inventory turnover rate?
- 6 times
- 8 times (Correct answer)
- 10 times
- 12 times
Correct answer: 8 times
Inventory turnover = COGS / average inventory = $320,000 / $40,000 = 8 times per year.
Question 4: Which controlled substance schedule in the US includes drugs with the highest accepted medical use but still significant abuse potential, such as ketamine?
- Schedule I
- Schedule II
- Schedule III (Correct answer)
- Schedule IV
Correct answer: Schedule III
Ketamine is classified as a Schedule III controlled substance, indicating accepted medical use with moderate-to-low physical dependence risk.
Question 5: What is the main advantage of a perpetual inventory system over a periodic one?
- It requires fewer staff hours annually
- It provides real-time stock level data (Correct answer)
- It eliminates the need for physical counts
- It automatically reorders products
Correct answer: It provides real-time stock level data
A perpetual inventory system updates stock levels continuously with each transaction, providing real-time visibility into inventory.
Question 6: A practice pays $15 per unit for a heartworm preventive and charges clients $35. What is the gross margin percentage?
- 42.9%
- 57.1% (Correct answer)
- 133%
- 57.9%
Correct answer: 57.1%
Gross margin % = (($35 − $15) / $35) × 100 = 57.1%.
Question 7: When evaluating supplier contracts, which factor most directly affects the total landed cost of an inventory item?
- The supplier's credit rating
- Shipping fees, minimum order requirements, and payment terms (Correct answer)
- The number of competing vendors
- Product color and packaging
Correct answer: Shipping fees, minimum order requirements, and payment terms
Landed cost includes the product price plus all shipping fees, minimum order requirements, and any financing costs from payment terms.
CVPM Inventory and Cost Control 3
A practice orders 200 units of flea prevention monthly at $8 each.
Holding cost is $0.50/unit/month and ordering cost is $25/order.
What is the EOQ?