CDPP Inventory Management

Question 1

What is the primary goal of inventory management in demand planning?

Accepted Answer

To balance supply with demand and minimize inventory costs

Answer

To maximize sales revenue without considering costs

Answer

To ensure inventory is kept at the lowest possible levels

Answer

To avoid stockouts at all costs

Question 2

What is the Economic Order Quantity (EOQ) model used for in inventory management?

Accepted Answer

To find the order quantity that minimizes inventory costs

Answer

To calculate the minimum amount of inventory needed to meet demand

Answer

To predict future inventory shortages

Answer

To decide when to discontinue a product

Question 3

How does Just-in-Time (JIT) inventory management help businesses?

Accepted Answer

By reducing the amount of inventory held and minimizing waste

Answer

By increasing inventory storage capacity

Answer

By overstocking products to prevent stockouts

Answer

By increasing order quantities to benefit from discounts

Question 4

What is the purpose of inventory turnover ratio?

Accepted Answer

To measure how efficiently inventory is used and replenished

Answer

To determine the profitability of a business

Answer

To calculate how much inventory should be ordered

Answer

To estimate the cost of holding inventory

Question 5

What is the difference between reorder point and lead time in inventory management?

Accepted Answer

Reorder point is when to place an order, and lead time is the time it takes for the order to be delivered

Answer

Reorder point is the time taken for an order to arrive, while lead time is the inventory level

Answer

Reorder point is when an order is placed, and lead time is the inventory amount on hand

Answer

Reorder point is used only for raw materials, while lead time is for finished goods

Question 6

What role does safety stock play in inventory management?

Accepted Answer

It ensures there is always excess inventory to avoid stockouts

Answer

It increases the total inventory cost

Answer

It is used to calculate the lead time for reordering inventory

Answer

It reduces the frequency of orders placed