CPL Logistics Cost Management & Financial Analysis 2 — Questions and Answers
Question 1: Which technique involves analyzing logistics costs by breaking them into price, efficiency, and usage variances compared to a standard or budget?
- Break-even analysis
- Variance analysis (Correct answer)
- Regression analysis
- Sensitivity analysis
Correct answer: Variance analysis
Variance analysis decomposes actual vs. budgeted logistics costs into specific causes (price paid, quantity used, efficiency achieved), enabling targeted corrective action.
Question 2: The economic order quantity (EOQ) model minimizes which combination of inventory-related costs?
- Holding costs and stockout costs
- Ordering costs and holding costs (Correct answer)
- Transportation costs and ordering costs
- Purchase price and storage costs
Correct answer: Ordering costs and holding costs
EOQ finds the order quantity that minimizes the sum of ordering costs (cost per order placed) and holding costs (cost to carry inventory), balancing the trade-off between the two.
Question 3: Which logistics financial analysis tool plots cumulative cost against cumulative output to identify fixed and variable cost components?
- Break-even chart
- Pareto analysis
- Cost-volume-profit (CVP) analysis (Correct answer)
- ABC inventory chart
Correct answer: Cost-volume-profit (CVP) analysis
Cost-volume-profit (CVP) analysis shows how changes in volume affect total costs and profit, revealing the fixed cost base and variable cost rate across output levels.
Question 4: A logistics operation has fixed costs of $200,000 and a variable cost of $5 per unit shipped. If the revenue per unit is $15, what is the break-even volume?
- 10,000 units
- 20,000 units (Correct answer)
- 40,000 units
- 13,333 units
Correct answer: 20,000 units
Break-even = Fixed Costs ÷ (Revenue per unit − Variable cost per unit) = $200,000 ÷ ($15 − $5) = $200,000 ÷ $10 = 20,000 units.
Question 5: In logistics budgeting, a 'flexible budget' differs from a 'static budget' in that it:
- Never requires revision during the year
- Adjusts cost projections based on actual activity levels (Correct answer)
- Only covers capital expenditures
- Is prepared only for fixed overhead items
Correct answer: Adjusts cost projections based on actual activity levels
A flexible budget recalculates expected costs at actual activity levels, making performance comparisons more meaningful than a static budget fixed at one planned volume.
Question 6: Which freight rate structure charges a fixed cost per shipment plus a variable rate per mile or per hundredweight?
- Class rate (Correct answer)
- Commodity rate
- Exception rate
- LTL zone rate
Correct answer: Class rate
Class rates are the standard published tariff structure in LTL freight that combine a base charge with a rate adjusted by freight class, distance, and weight, creating a fixed-plus-variable pricing model.
Question 7: When evaluating a capital investment in new logistics technology, which discounted cash flow measure expresses profitability as a percentage return?
- Net present value (NPV)
- Internal rate of return (IRR) (Correct answer)
- Payback period
- Accounting rate of return (ARR)
Correct answer: Internal rate of return (IRR)
The internal rate of return (IRR) is the discount rate at which the NPV of a project equals zero, expressing the investment's profitability as an annualized percentage return for easy comparison.
CPL Logistics Cost Management & Financial Analysis 2
Which technique involves analyzing logistics costs by breaking them into price, efficiency, and usage variances compared to a standard or budget?