Supply Chain and Logistics Inventory Management 3

Question 1

What is cycle counting?

Accepted Answer

Counting a rotating subset of inventory items on a regular schedule

Answer

Cycle counting replaces full physical inventory counts by regularly auditing small portions of inventory throughout the year.

Question 2

Which inventory valuation method results in the lowest net income during rising prices?

Accepted Answer

LIFO

Answer

LIFO (Last In, First Out) reports the most recently purchased (higher-cost) goods as sold first, increasing COGS and reducing net income during inflation.

Question 3

What does VMI stand for in supply chain management?

Accepted Answer

Vendor-Managed Inventory

Answer

Vendor-Managed Inventory (VMI) allows suppliers to monitor and replenish a buyer's inventory levels without requiring purchase orders.

Question 4

What is the formula for Days Inventory Outstanding (DIO)?

Accepted Answer

(Average Inventory / COGS) × 365

Answer

DIO measures how many days on average a company holds inventory before selling it, calculated as (Average Inventory / COGS) × 365.

Question 5

What is a bill of materials (BOM)?

Accepted Answer

A comprehensive list of raw materials and components needed to manufacture a product

Answer

A bill of materials specifies all components, sub-assemblies, and quantities required to produce a finished product.

Supply Chain and Logistics Practice Test

Supply Chain and Logistics Practice Test

Supply Chain and Logistics Inventory Management 3