Inventory Management Flashcards
7 cards from real Financial Management for Project Managers practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Inventory Management flashcards as text
Which inventory management technique uses demand forecasts and bill-of-materials data to calculate future inventory requirements for manufacturing projects?
Answer: Material Requirements Planning (MRP)
MRP uses the master production schedule, bill of materials, and current inventory records to plan when and how much material to order.
A project manager implements Vendor-Managed Inventory (VMI). Which party is responsible for determining replenishment quantities and timing under this arrangement?
Answer: The supplier
In VMI, the supplier monitors the buyer's inventory levels and takes responsibility for replenishment decisions, reducing the buyer's ordering burden.
Which of the following costs is considered a 'stockout cost' in inventory management?
Answer: Lost sales due to unavailable products
Stockout costs include lost sales, emergency procurement premiums, expediting fees, and damage to customer relationships caused by inventory shortages.
A project manager is evaluating a supplier offering a 3% discount for orders exceeding 1,000 units (current EOQ is 400 units). Which analysis framework should guide this decision?
Answer: Quantity discount model
The quantity discount model compares total costs (purchase price + ordering + holding) at different order quantities to determine if the discount justifies the larger order.
A project experiences 'inventory shrinkage.' Which of the following is NOT a typical cause of shrinkage?
Answer: Increasing safety stock levels
Shrinkage refers to unexplained inventory losses from theft, damage, or errors; intentionally increasing safety stock is a management decision, not a source of shrinkage.
Under consignment inventory arrangements, when does the buying company recognize the inventory as an asset on its balance sheet?
Answer: When the buyer sells or consumes the goods
Consigned inventory remains the supplier's asset until sold or used by the buyer; the buyer records it only upon sale or consumption.
A project manager calculates the Cash Conversion Cycle (CCC). Which change would most directly shorten the CCC?
Answer: Reducing Days Inventory Outstanding (DIO)
CCC = DIO + DSO − DPO; reducing DIO means inventory is converted to sales faster, directly shortening the cash conversion cycle.