GLP GLP Financial Management & Cost Control 1 — Questions and Answers
Question 1: Which cost category in logistics refers to the expense of holding inventory over a period of time, including storage, insurance, and obsolescence?
- Carrying cost (Correct answer)
- Ordering cost
- Stockout cost
- Transit cost
Correct answer: Carrying cost
Carrying cost (also called holding cost) includes storage fees, insurance, spoilage, and the opportunity cost of capital tied up in inventory.
Question 2: A logistics company has total fixed costs of $500,000 and a contribution margin per unit of $25. How many units must be sold to break even?
- 10,000 units
- 20,000 units (Correct answer)
- 25,000 units
- 50,000 units
Correct answer: 20,000 units
Break-even units = Fixed Costs ÷ Contribution Margin per Unit = $500,000 ÷ $25 = 20,000 units.
Question 3: What does the term 'landed cost' represent in global logistics financial planning?
- Only the purchase price of goods
- Total cost including purchase price, freight, insurance, duties, and fees to deliver goods to destination (Correct answer)
- The cost of unloading cargo at a port
- Insurance premiums for ocean freight
Correct answer: Total cost including purchase price, freight, insurance, duties, and fees to deliver goods to destination
Landed cost is the complete cost of a shipment arriving at its destination, encompassing product price, transportation, insurance, customs duties, and all other fees.
Question 4: Which financial metric measures the revenue generated per dollar of logistics cost incurred?
- Return on Assets (ROA)
- Logistics Cost Ratio
- Gross Margin Return on Investment (GMROI)
- Cost-to-Serve Ratio (Correct answer)
Correct answer: Cost-to-Serve Ratio
The Cost-to-Serve Ratio compares logistics costs to revenue, revealing how efficiently the supply chain converts expenditure into sales.
Question 5: In logistics budgeting, which approach builds the budget from zero each period by justifying all expenses anew rather than using prior-year figures as a baseline?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Rolling forecast budgeting
- Activity-based budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting requires each department to justify every line item from scratch each cycle, preventing automatic carry-over of unnecessary costs.
Question 6: A 3PL provider charges $2.50 per unit for fulfillment. If a shipper processes 80,000 units per month, what is the monthly fulfillment cost?
- $160,000
- $200,000 (Correct answer)
- $250,000
- $320,000
Correct answer: $200,000
$2.50 × 80,000 units = $200,000 monthly fulfillment cost.
GLP GLP Financial Management & Cost Control 1
Which cost category in logistics refers to the expense of holding inventory over a period of time, including storage, insurance, and obsolescence?