Practice Test Geeks(CPIM) Certified in Planning and Inventory Management Practice Test
← All CPIM Flashcard Decks

Inventory Planning & Control Strategies Flashcards

7 cards from real CPIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Inventory Planning & Control Strategies flashcards as text

  1. A company has annual demand of 10,000 units, ordering cost of $50 per order, and holding cost of $2 per unit per year. What is the EOQ?

    Answer: 707 units

    EOQ = √(2DS/H) = √(2 × 10,000 × 50 / 2) = √500,000 ≈ 707 units.

  2. Which inventory replenishment strategy is most appropriate for items with highly lumpy or sporadic demand?

    Answer: Lot-for-lot (LFL)

    Lot-for-lot orders exactly the quantity needed to meet net requirements each period, avoiding excess inventory for items with irregular demand.

  3. In a two-bin kanban system, what triggers a replenishment order?

    Answer: When the first bin is emptied and the second bin is opened

    In a two-bin system, opening (emptying) the first bin signals the need to reorder; the second bin contains enough stock to cover demand during replenishment lead time.

  4. What is the primary advantage of vendor-managed inventory (VMI)?

    Answer: The supplier manages replenishment, reducing buyer administrative burden and often improving fill rates

    VMI transfers replenishment responsibility to the supplier, who uses shared data to optimize inventory levels, reducing stockouts and administrative costs for the buyer.

  5. Which term describes the total cost associated with placing and receiving a single purchase order, regardless of order size?

    Answer: Ordering cost

    Ordering cost (or procurement cost) includes all expenses associated with placing a single order, such as processing, receiving, and inspection, independent of quantity.

  6. A fill rate of 95% means that:

    Answer: 95% of demand is satisfied from stock on hand without backorders

    Fill rate measures the percentage of demand immediately satisfied from available inventory; a 95% fill rate means 5% of demand results in a backorder or lost sale.

  7. Which inventory classification approach categorizes items by their criticality to operations, regardless of value or usage frequency?

    Answer: VED (Vital/Essential/Desirable) analysis

    VED analysis classifies items by their operational importance: Vital (operations stop without them), Essential (serious impact), and Desirable (minor impact if unavailable).