E-Commerce Development Inventory Management 1 — Questions and Answers
Question 1: What is a SKU in e-commerce inventory management?
- A unique alphanumeric identifier assigned to each distinct product variant (Correct answer)
- A sales tracking utility used to measure revenue per product line
- A system knowledge update protocol for syncing databases
- A standard kit unit representing a bundled product package
Correct answer: A unique alphanumeric identifier assigned to each distinct product variant
A SKU (Stock Keeping Unit) is a unique alphanumeric identifier assigned to each distinct product variant so businesses can track inventory accurately.
Question 2: What does 'safety stock' refer to in inventory management?
- Products stored in a secured, locked warehouse area
- Extra inventory kept on hand to prevent stockouts due to demand or supply fluctuations (Correct answer)
- Inventory reserved exclusively for product recalls and customer returns
- Stock allocated specifically for wholesale and B2B customers
Correct answer: Extra inventory kept on hand to prevent stockouts due to demand or supply fluctuations
Safety stock is buffer inventory maintained above expected demand to prevent stockouts when demand spikes or supplier shipments are delayed.
Question 3: Which inventory valuation method assigns the cost of the most recently purchased items to cost of goods sold (COGS)?
- FIFO (First In, First Out)
- Weighted Average Cost
- LIFO (Last In, First Out) (Correct answer)
- Specific Identification
Correct answer: LIFO (Last In, First Out)
LIFO (Last In, First Out) assigns the cost of the newest inventory to COGS, meaning recently purchased items are treated as sold first for accounting purposes.
Question 4: What is a reorder point in inventory management?
- The maximum quantity of inventory that should be held at any time
- The inventory level at which a new purchase order should be triggered (Correct answer)
- The point at which excess inventory is marked down for clearance sale
- The number of days until an out-of-stock product is replenished by a supplier
Correct answer: The inventory level at which a new purchase order should be triggered
The reorder point is the inventory level that triggers a new purchase order, calculated to ensure new stock arrives before current inventory is exhausted.
Question 5: What does 'dead stock' mean in e-commerce?
- Inventory that has passed its expiration date and must be disposed of
- Products that are backordered and awaiting delivery from a supplier
- Unsold inventory that is no longer expected to generate sales (Correct answer)
- Products removed from the website but still physically present in the warehouse
Correct answer: Unsold inventory that is no longer expected to generate sales
Dead stock refers to inventory that has not sold and is unlikely to sell, tying up capital and storage space without generating revenue.
Question 6: Which metric measures how many times a company's inventory is sold and replaced over a specific period?
- Fill rate
- Inventory turnover ratio (Correct answer)
- Days sales of inventory (DSI)
- Gross margin return on investment (GMROI)
Correct answer: Inventory turnover ratio
The inventory turnover ratio measures how many times inventory is sold and replenished within a period, indicating how efficiently a business manages its stock.
Question 7: What is a perpetual inventory system?
- A system that counts all inventory once per year during a scheduled physical audit
- An inventory method that continuously updates stock levels in real-time after every transaction (Correct answer)
- A spreadsheet-based manual tracking system designed for small businesses
- A system that automatically places reorders when stock levels fall below a set threshold
Correct answer: An inventory method that continuously updates stock levels in real-time after every transaction
A perpetual inventory system continuously updates inventory records after each sale, purchase, or adjustment, providing accurate and current stock levels at all times.
E-Commerce Development Inventory Management 1
What is a SKU in e-commerce inventory management?