Inventory Management Flashcards
6 cards from real CSCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Inventory Management flashcards as text
The Economic Order Quantity (EOQ) model minimizes the sum of which two costs?
Answer: Ordering costs and holding (carrying) costs
EOQ finds the order quantity that minimizes the total of ordering costs (cost per order) and holding costs (cost to store inventory).
Which inventory classification method segments items into A, B, and C categories based on annual dollar usage?
Answer: ABC analysis (Pareto analysis)
ABC analysis applies the Pareto principle: A items (~20% of SKUs) typically represent ~80% of annual dollar usage and receive the most management attention.
Safety stock is held primarily to protect against:
Answer: Variability in demand and supply lead time uncertainty
Safety stock acts as a buffer against unpredictable fluctuations in customer demand and variability in supplier replenishment lead times.
What is the 'reorder point' (ROP) in inventory management?
Answer: The inventory level at which a replenishment order should be placed to avoid a stockout
The ROP is calculated as average demand during lead time plus safety stock, triggering an order before inventory is depleted.
Which inventory valuation method assumes that the most recently purchased items are sold first?
Answer: LIFO (Last In, First Out)
LIFO assumes the newest inventory is consumed first, which in rising price environments results in higher COGS and lower ending inventory value.
Cycle counting is an inventory accuracy technique that involves:
Answer: Counting a subset of inventory on a rotating basis throughout the year rather than one annual physical count
Cycle counting improves inventory accuracy by continuously auditing portions of inventory, catching discrepancies early without shutting down operations.