Supply Chain Management Inventory Management 2

Question 1

Which inventory costing method assumes that the most recently purchased items are sold first?

Accepted Answer

LIFO

Answer

LIFO (Last-In, First-Out) assumes the most recently acquired inventory is the first to be sold or used.

Question 2

A company has a reorder point of 500 units and receives replenishment orders every 10 days. If daily demand is 50 units, what is the safety stock level?

Accepted Answer

0 units

Answer

With daily demand of 50 units and a 10-day lead time equaling exactly 500 units, the reorder point covers lead time demand with zero safety stock.

Question 3

What does the term 'dead stock' refer to in inventory management?

Accepted Answer

Inventory that has not been sold or used for a long period

Answer

Dead stock refers to inventory items that have not moved (sold or used) for an extended period and are unlikely to in the future.

Question 4

In the context of ABC analysis, which category represents items that are high-value but low in quantity?

Accepted Answer

A items

Answer

A items are typically the top 10–20% of SKUs that account for approximately 70–80% of total inventory value.

Question 5

What is 'cycle counting' in inventory management?

Accepted Answer

A continuous auditing process where a subset of inventory is counted on a rotating schedule

Answer

Cycle counting involves regularly counting a rotating subset of inventory items instead of performing a single annual physical count.

Supply Chain Management Practice Test

Supply Chain Management Practice Test

Supply Chain Management Inventory Management 2