Question #1
XYZ Ltd organises a meeting in order to decide on the safety stock level of a strategic material which is used in XYZ latest product – DMD. To do this, they must forecast the future demand for this new product. In the meeting, external consultants are invited to join with cross-functional team. Each person of the group anonymously replies to questionnaires and subsequently receives feedback in the form of a statistical representation of the "group response," after which the process repeats itself. The goal is to reduce the range of responses and arrive at something closer to expert consensus. XYZ Ltd is using which forecasting method?
- A . Objective forecasting technique
- B . Delphi method
- C . Holt-Winters seasonal method
- D . Time series analysis
Correct Answer: B
B
Explanation:
Delphi method was developed in the 1950s, originally to forecast the impact of technology on warfare. The method entails a group of experts who anonymously reply to questionnaires and subsequently receive feedback in the form of a statistical representation of the "group response," after which the process repeats itself. The goal is to reduce the range of responses and arrive at something closer to expert consensus. The Delphi Method has been widely adopted and is still in use today. Delphi method is a subjective forecasting technique Holt-Winters forecasting is a way to model and predict the behavior of a sequence of values over time―a time series. Holt-Winters is one of the most popular forecasting techniques for time series. It’s decades old, but it’s still ubiquitous in many applications, including monitoring, where it’s used for purposes such as anomaly detection and capacity planning.
Time series analysis is a statistical technique that deals with time series data, or trend analysis. Time series data means that data is in a series of particular time periods or intervals.
Objective forecasting approaches are quantitative in nature and lend themselves well to an abundance of data. There are three categories of objective forecasting methods: time series, causal/econometric, and artificial intelligence.
LO 2, AC 2.3
B
Explanation:
Delphi method was developed in the 1950s, originally to forecast the impact of technology on warfare. The method entails a group of experts who anonymously reply to questionnaires and subsequently receive feedback in the form of a statistical representation of the "group response," after which the process repeats itself. The goal is to reduce the range of responses and arrive at something closer to expert consensus. The Delphi Method has been widely adopted and is still in use today. Delphi method is a subjective forecasting technique Holt-Winters forecasting is a way to model and predict the behavior of a sequence of values over time―a time series. Holt-Winters is one of the most popular forecasting techniques for time series. It’s decades old, but it’s still ubiquitous in many applications, including monitoring, where it’s used for purposes such as anomaly detection and capacity planning.
Time series analysis is a statistical technique that deals with time series data, or trend analysis. Time series data means that data is in a series of particular time periods or intervals.
Objective forecasting approaches are quantitative in nature and lend themselves well to an abundance of data. There are three categories of objective forecasting methods: time series, causal/econometric, and artificial intelligence.
LO 2, AC 2.3
Question #2
XYZ Ltd has been adopting MRP system for years. The system helps the company improve efficiency greatly and generates huge cost-savings. However, MRP system is only limited to production process
management and XYZ management team would like to have better insights into re-sources required across the organisation as a whole.
Which software system would help XYZ management team achieve the above objective?
- A . MRP II
- B . MPS
- C . ERP
- D . P2P
Correct Answer: C
C
Explanation:
Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. ERP provides an integrated and continuously updated view of core business processes using common databases maintained by a data-base management system. ERP systems track business resources―cash, raw materials, production capacity―and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data. ERP facilitates information flow between all business functions and manages connections to outside stakeholders.
Manufacturing resource planning (MRP II) is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP. This is not exclusively a software function, but the management of people skills, requiring a dedication to database accuracy, and sufficient computer resources. It is a total company management concept for using human and company resources more productively.
A master production schedule (MPS) is a plan for individual commodities to be produced in each time period such as production, staffing, inventory, etc. It is usually linked to manufacturing where the plan indicates when and how much of each product will be demanded. This plan quantifies significant processes, parts, and other resources in order to optimize production, to identify bottlenecks, and to anticipate needs and completed goods. Since a MPS drives much factory activity, its accuracy and viability dramatically affect profitability.
Procure-to-pay (P2P) is a term used in the software industry to designate a specific subdivision of the procurement process. The procure-to-pay systems enable the integration of the purchasing department with the accounts payable (AP) department. Some of the largest players of the software
industry agree on a common definition of procure-to-pay, linking the procurement process and
financial department.
LO 2, AC 2.3
C
Explanation:
Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. ERP provides an integrated and continuously updated view of core business processes using common databases maintained by a data-base management system. ERP systems track business resources―cash, raw materials, production capacity―and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data. ERP facilitates information flow between all business functions and manages connections to outside stakeholders.
Manufacturing resource planning (MRP II) is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP. This is not exclusively a software function, but the management of people skills, requiring a dedication to database accuracy, and sufficient computer resources. It is a total company management concept for using human and company resources more productively.
A master production schedule (MPS) is a plan for individual commodities to be produced in each time period such as production, staffing, inventory, etc. It is usually linked to manufacturing where the plan indicates when and how much of each product will be demanded. This plan quantifies significant processes, parts, and other resources in order to optimize production, to identify bottlenecks, and to anticipate needs and completed goods. Since a MPS drives much factory activity, its accuracy and viability dramatically affect profitability.
Procure-to-pay (P2P) is a term used in the software industry to designate a specific subdivision of the procurement process. The procure-to-pay systems enable the integration of the purchasing department with the accounts payable (AP) department. Some of the largest players of the software
industry agree on a common definition of procure-to-pay, linking the procurement process and
financial department.
LO 2, AC 2.3
Question #3
Assuming that all other factors are constant except one, the net present value of a capital expenditure increases when…?
- A . The initial cost of a project increases
- B . The discounted rate increases
- C . Net cash flow during a time period increases
- D . Cash outflow during a time period increases
Correct Answer: C
C
Explanation:
Net present value (NPV) is the ‘today’ net value that deprives from ‘future’ cash flow of an invest-ment or a capital purchase.
The following formula is used to calculate NPV
C
Explanation:
Net present value (NPV) is the ‘today’ net value that deprives from ‘future’ cash flow of an invest-ment or a capital purchase.
The following formula is used to calculate NPV
Where:
Rt is the net cash flow (cash inflow – cash outflow) during the period t
i is the discount rate
t is the number of time periods
As you can conclude from the above formula, the net present value increases when the numerators (net cash flows) increase and/or denominators (1+i) decrease. So the correct answer should be "Net cash flow during a time period increases"
The purpose of this exercise is to help you identify the factors that influence the net present value and how to increase/decrease NPV in real-world scenario.
Reference:
– Net present value in capital expenditure
– CIPS study guide page 177
LO 3, AC 3.2
Question #4
A supermarket calculates that the average holding cost for an item is $1.50 per cubic meter per day. A beer pallet which has volume of 0.5 cubic meter will be stored for 5 days.
What is the holding cost of this beer pallet?
- A . $4.00
- B . $4.50
- C . $4.25
- D . $3.75
Correct Answer: D
D
Explanation:
The holding cost per day of the beer pallet is equal to 1.50/2=0.75
The beer pallet is stored for 5 days, the total holding cost is: 0.75*5=3.75.
LO 2, AC 2.2
D
Explanation:
The holding cost per day of the beer pallet is equal to 1.50/2=0.75
The beer pallet is stored for 5 days, the total holding cost is: 0.75*5=3.75.
LO 2, AC 2.2
Question #5
Which of the following is the minimum aisle width for using standard counterbalanced forklifts?
- A . 4.9 ft – 5.2 ft
- B . 5.6 ft – 5.9 ft
- C . 6.9 ft – 7.2 ft
- D . 10.5 ft – 13.1 ft
Correct Answer: D
D
Explanation:
Minimum open aisle width for standard counterbalance forklift is 10.5-13.1 ft. You can look at the minimum aisle width for different equipment here, or calculate yourself with an instruction here. LO 1, AC 1.3
D
Explanation:
Minimum open aisle width for standard counterbalance forklift is 10.5-13.1 ft. You can look at the minimum aisle width for different equipment here, or calculate yourself with an instruction here. LO 1, AC 1.3
Question #6
With D is the annual demand (units), S is cost per order, H is annual carrying cost per unit; the formula for Economic Order Quantity is….?
- A . √(D*S/2H)
- B . √(2D*S/H)
- C . √(D*S*H)
- D . √(D*S/3H)
Correct Answer: B
B
Explanation:
B
Explanation:
LO 2, AC 2.3
Question #7
To improve the security of a warehouse, alarm systems are commonly used.
Which of the following is an important part of these systems?
- A . Sensors
- B . Fencing
- C . CCTV
- D . Lighting
Correct Answer: A
A
Explanation:
The most basic alarm consists of one or more sensors to detect intruders, and an alerting device to indicate the intrusion.
However, a typical premises security alarm employs the following compo-nents:
– Premises control unit (PCU), Alarm Control Panel (ACP), or simply panel: The "brain" of the system, it reads sensor inputs, tracks arm/disarm status, and signals intrusions. In modern system, this is typically one or more computer circuit boards inside a metal enclosure, along with a power supply.
– Sensors: Devices which detect intrusions. Sensors may be placed at the perimeter of the protected area, within it, or both. Sensors can detect intruders by a variety of methods, such as monitoring doors and windows for opening, or by monitoring unoccupied interiors for motions, sound, vibration, or other disturbances.
– Alerting devices: These indicate an alarm condition. Most commonly, these are bells, sirens, and/or flashing lights. Alerting devices serve the dual purposes of warning occupants of intrusion, and potentially scaring off burglars. These devices may also be used to warn occupants of a fire or smoke condition.
– Keypads: Small devices, typically wall-mounted, which function as the human-machine interface to the system. In addition to buttons, keypads typically feature indicator lights, a small multi-character display, or both.etc.
– Interconnections between components. This may consist of direct wiring to the control unit, or wireless links with local power supplies.
In addition to the system itself, security alarms are often coupled with a monitoring service. In the event of an alarm, the premises control unit contacts a central monitoring station. Operators at the station see the signal and take appropriate action, such as contacting property owners, notifying police, or dispatching private security forces. Such signals may be transmitted via dedicated alarm circuits, telephone lines, or the internet.
Reference:
Security alarm – Wikipedia LO 1, AC 1.1
A
Explanation:
The most basic alarm consists of one or more sensors to detect intruders, and an alerting device to indicate the intrusion.
However, a typical premises security alarm employs the following compo-nents:
– Premises control unit (PCU), Alarm Control Panel (ACP), or simply panel: The "brain" of the system, it reads sensor inputs, tracks arm/disarm status, and signals intrusions. In modern system, this is typically one or more computer circuit boards inside a metal enclosure, along with a power supply.
– Sensors: Devices which detect intrusions. Sensors may be placed at the perimeter of the protected area, within it, or both. Sensors can detect intruders by a variety of methods, such as monitoring doors and windows for opening, or by monitoring unoccupied interiors for motions, sound, vibration, or other disturbances.
– Alerting devices: These indicate an alarm condition. Most commonly, these are bells, sirens, and/or flashing lights. Alerting devices serve the dual purposes of warning occupants of intrusion, and potentially scaring off burglars. These devices may also be used to warn occupants of a fire or smoke condition.
– Keypads: Small devices, typically wall-mounted, which function as the human-machine interface to the system. In addition to buttons, keypads typically feature indicator lights, a small multi-character display, or both.etc.
– Interconnections between components. This may consist of direct wiring to the control unit, or wireless links with local power supplies.
In addition to the system itself, security alarms are often coupled with a monitoring service. In the event of an alarm, the premises control unit contacts a central monitoring station. Operators at the station see the signal and take appropriate action, such as contacting property owners, notifying police, or dispatching private security forces. Such signals may be transmitted via dedicated alarm circuits, telephone lines, or the internet.
Reference:
Security alarm – Wikipedia LO 1, AC 1.1
Question #8
Which of the following best describes the term ‘periodic review’?
- A . Items are reviewed and orders placed depending on requirements
- B . Items are reviewed when the Kanban is triggered
- C . Items are reviewed when the price is at its lowest
- D . Items are reviewed as part of an imprest system
Correct Answer: A
A
Explanation:
Periodic review refers to a system where inventory levels or the conditions of assets are reviewed at regular intervals, and necessary actions (like ordering more inventory, maintenance, etc.) are taken based on the current requirements. It’s a proactive approach to ensure that the management is keeping up with the demands or maintenance schedules of the assets.
B, C, and D don’t adequately describe what is commonly understood by a ‘periodic review’ in asset management.
Option B is related to the Kanban system which is a specific type of inventory management system, but it is not descriptive of what ‘periodic review’ is generally.
Option C seems more related to a strategy for purchasing items rather than a description of ‘periodic review’.
Option D references the imprest system, which is primarily a method for managing petty cash, not really applicable to the ‘periodic review’ in the broader sense of asset management.
A
Explanation:
Periodic review refers to a system where inventory levels or the conditions of assets are reviewed at regular intervals, and necessary actions (like ordering more inventory, maintenance, etc.) are taken based on the current requirements. It’s a proactive approach to ensure that the management is keeping up with the demands or maintenance schedules of the assets.
B, C, and D don’t adequately describe what is commonly understood by a ‘periodic review’ in asset management.
Option B is related to the Kanban system which is a specific type of inventory management system, but it is not descriptive of what ‘periodic review’ is generally.
Option C seems more related to a strategy for purchasing items rather than a description of ‘periodic review’.
Option D references the imprest system, which is primarily a method for managing petty cash, not really applicable to the ‘periodic review’ in the broader sense of asset management.
Question #9
What is the different between gross material requirements plan (gross MRP) and a net material requirements plan (net MRP)?
- A . The gross requirement doesn’t take taxes into account, whereas the net requirement includes the tax considerations
- B . The gross MRP includes consideration of available inventory, whereas the net MRP does not
- C . The net MRP includes the amount of inventory on hand, whereas the gross MRP does not
- D . The gross MRP is mostly paper-based, but the net MRP must be computerised
Correct Answer: C
C
Explanation:
Gross Material Requirements Planning (Gross MRP) is a process where the total demand for materials is calculated without considering the current inventory levels. It is simply an estimation of the total materials required to meet the production demand.
On the other hand, Net Material Requirements Planning (Net MRP) is a more refined process where the current inventory levels are taken into account. In net MRP, the gross requirements are adjusted for the available inventory and the scheduled receipts to determine the actual materials needed to meet the production demand.
The options A, B, and D don’t adequately describe the difference between gross MRP and net MRP.
Option A introduces an unrelated concept (tax considerations) which is not pertinent to the difference between gross and net MRP.
Option B is incorrect as it states the opposite of the correct relationship between gross and net MRP.
Option D introduces a method of documentation (paper-based vs. computerized) which is not a defining difference between gross and net MRP. Both gross and net MRP can be either paper-based or computerized.
C
Explanation:
Gross Material Requirements Planning (Gross MRP) is a process where the total demand for materials is calculated without considering the current inventory levels. It is simply an estimation of the total materials required to meet the production demand.
On the other hand, Net Material Requirements Planning (Net MRP) is a more refined process where the current inventory levels are taken into account. In net MRP, the gross requirements are adjusted for the available inventory and the scheduled receipts to determine the actual materials needed to meet the production demand.
The options A, B, and D don’t adequately describe the difference between gross MRP and net MRP.
Option A introduces an unrelated concept (tax considerations) which is not pertinent to the difference between gross and net MRP.
Option B is incorrect as it states the opposite of the correct relationship between gross and net MRP.
Option D introduces a method of documentation (paper-based vs. computerized) which is not a defining difference between gross and net MRP. Both gross and net MRP can be either paper-based or computerized.
Question #10
The following are examples of scheduled maintenance except…
- A . Oil changes and regular servicing
- B . Overhauling of machine
- C . Repair signage damage from a recent storm
- D . Cleaning of tank
Correct Answer: C
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
Question #10
The following are examples of scheduled maintenance except…
- A . Oil changes and regular servicing
- B . Overhauling of machine
- C . Repair signage damage from a recent storm
- D . Cleaning of tank
Correct Answer: C
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
Question #10
The following are examples of scheduled maintenance except…
- A . Oil changes and regular servicing
- B . Overhauling of machine
- C . Repair signage damage from a recent storm
- D . Cleaning of tank
Correct Answer: C
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
Question #10
The following are examples of scheduled maintenance except…
- A . Oil changes and regular servicing
- B . Overhauling of machine
- C . Repair signage damage from a recent storm
- D . Cleaning of tank
Correct Answer: C
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
Question #10
The following are examples of scheduled maintenance except…
- A . Oil changes and regular servicing
- B . Overhauling of machine
- C . Repair signage damage from a recent storm
- D . Cleaning of tank
Correct Answer: C
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
C
Explanation:
Scheduled maintenance is any repair and upkeep work performed within a set timeframe. It details when given maintenance tasks are performed and by whom. Scheduled maintenance may occur at repeating intervals or in response to a work request.
"Overhauling of machine" means that the machine is regularly checked and corrupted parts are replaced if needed.
"Cleaning of tank" and "Oil changes" also occur at time intervals as scheduled So the correct answer is "Repair signage damage from a recent storm"
Reference: CIPS study guide page 158-163 LO 3, AC 3.1
Question #15
L-shape layout
- A . 1 and 2 only
- B . 3 and 4 only
- C . 1 and 3 only
- D . 2 and 3 only
Correct Answer: A
A
Explanation:
In a traditional warehouse, storage racks are arranged to create parallel picking aisles, perhaps with one or more cross aisles to allow workers to move quickly between picking aisles. This structure forces workers to travel rectilinear distances (north-south and east-west) to picking locations.
A
Explanation:
In a traditional warehouse, storage racks are arranged to create parallel picking aisles, perhaps with one or more cross aisles to allow workers to move quickly between picking aisles. This structure forces workers to travel rectilinear distances (north-south and east-west) to picking locations.
Kevin R. Gue and Russell
D. Meller proposed alternative aisle designs:
– The ‘Fan’ shaped layout (or “Flying V”). This layout maintains parallel picking aisles, but al-lows the
cross aisle to take on a different shape. If travel begins and ends at the bottom of the V, Gue and Meller expected distance to retrieve a single pallet is 10% less in this warehouse than in an equivalent traditional design.
– The Herringbone-shaped layout (or commonly referred as Fishbone layout) combines the verti-cal picking rows of a traditional warehouse with a second set of horizontal picking rows, divided by a V-shaped diagonal alley crossing the entire warehouse. This simple modification to the typical warehouse design allows employees (e.g. a forklift driver) to increase travel speed between picking locations. Efficiency gains achieved through a layout reconfiguration would reduce picking cost up to 23% compared to an equivalent warehouse using a traditional configuration.
Reference
Aisle Design – Kevin Gue
LO 1, AC 1.1
Question #16
ANTA Logistics is looking for a place to build a new, integrated cold chain facility, “Chill Hub”, to its customers.
Which of the following need to be considered when selecting the location of the new facility? Select TWO that apply.
- A . Availability of the building
- B . Ease of objective forecasting on inventory level
- C . Volume of obsolescent stock
- D . Accessibility to roads and highways
- E . Availability of product coding system
Correct Answer: A, D
A, D
Explanation:
There are many different factors that must be considered when assessing warehouse and stock locations:
• Operating cost of the location or area
• Availability and suitability of warehouses
• Availability of manpower or labour
• Proximity to suppliers and customers
• Access to transport infrastructure (domestic and international)
• The political and security environment of the location
LO 1, AC 1.1
A, D
Explanation:
There are many different factors that must be considered when assessing warehouse and stock locations:
• Operating cost of the location or area
• Availability and suitability of warehouses
• Availability of manpower or labour
• Proximity to suppliers and customers
• Access to transport infrastructure (domestic and international)
• The political and security environment of the location
LO 1, AC 1.1
Question #17
The ABC approach involves classifying inventory items by unit cost, with expensive items classified as ‘A’ items and low cost items classified as ‘C’ items. Is this statement true?
- A . Yes, ‘A’ items represent approximately 20% of total unit prices
- B . Yes, ‘C’ items with the lowest unit prices are the tail spends
- C . No, ABC analysis considers the usage of each inventory item
- D . No, ABC analysis considers the supply risks associated with an inventory item
Correct Answer: C
C
Explanation:
ABC analysis is an approach for classifying inventory items based on the items’ consumption values. Consumption value is the total value of an item consumed over a specified time period, for example a year.
The approach is based on the Pareto principle to help manage what matters and is applied in this context:
– A items are goods where annual consumption value is the highest. Applying the Pareto principle (also referred to as the 80/20 rule where 80 percent of the output is determined by 20 percent of the input), they comprise a relatively small number of items but have a relatively high consumption value. So it’s logical that analysis and control of this class is relatively intense, since there is the greatest potential to reduce costs or losses.
– B items are interclass items. Their consumption values are lower than A items but higher than C items. A key point of having this interclass group is to watch items close to A item and C item classes that would alter their stock management policies if they drift closer to class A or class
C. Stock management is itself a cost. So there needs to be a balance between controls to protect the asset class and the value at risk of loss, or the cost of analysis and the potential value returned by reducing class costs. So, the scope of this class and the inventory management policies are determined by the estimated cost-benefit of class cost reduction, and loss control systems and processes.
– C items have the lowest consumption value. This class has a relatively high proportion of the total
number of lines but with relatively low consumption values. Logically, it’s not usually cost-effective to deploy tight inventory controls, as the value at risk of significant loss is relatively low and the cost of analysis would typically yield relatively low returns. LO 2, AC 2.1
C
Explanation:
ABC analysis is an approach for classifying inventory items based on the items’ consumption values. Consumption value is the total value of an item consumed over a specified time period, for example a year.
The approach is based on the Pareto principle to help manage what matters and is applied in this context:
– A items are goods where annual consumption value is the highest. Applying the Pareto principle (also referred to as the 80/20 rule where 80 percent of the output is determined by 20 percent of the input), they comprise a relatively small number of items but have a relatively high consumption value. So it’s logical that analysis and control of this class is relatively intense, since there is the greatest potential to reduce costs or losses.
– B items are interclass items. Their consumption values are lower than A items but higher than C items. A key point of having this interclass group is to watch items close to A item and C item classes that would alter their stock management policies if they drift closer to class A or class
C. Stock management is itself a cost. So there needs to be a balance between controls to protect the asset class and the value at risk of loss, or the cost of analysis and the potential value returned by reducing class costs. So, the scope of this class and the inventory management policies are determined by the estimated cost-benefit of class cost reduction, and loss control systems and processes.
– C items have the lowest consumption value. This class has a relatively high proportion of the total
number of lines but with relatively low consumption values. Logically, it’s not usually cost-effective to deploy tight inventory controls, as the value at risk of significant loss is relatively low and the cost of analysis would typically yield relatively low returns. LO 2, AC 2.1
Question #18
Which of the following costs does the EOQ minimise?
- A . Total cost of safety stock
- B . Total cost of ordering inventory
- C . Total cost of annual inventory cost
- D . Total cost of carrying stock
Correct Answer: C
C
Explanation:
Economic order quantity (EOQ) was developed in 1913 by Ford W. Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant. The EOQ minimizes the total annual inventory cost.
EOQ formula is as follow:
C
Explanation:
Economic order quantity (EOQ) was developed in 1913 by Ford W. Harris and has been refined over time. The formula assumes that demand, ordering, and holding costs all remain constant. The EOQ minimizes the total annual inventory cost.
EOQ formula is as follow:
LO 2, AC 2.3
Question #19
A major investment bank is planning to purchase a complex banking system that will interface with multiple applications at varying times of the day. Before deploying the system, there are various levels of testing that must be performed through joint testing between the in-house team and off-shore testing consultants. The testing will be performed in a resource-constrained shared environment and managed by the on-shore development team.
The costs for testing are generally classified as…?
- A . Insurance
- B . Maintenance costs
- C . Acquisition costs
- D . Purchase prices
Correct Answer: C
C
Explanation:
In the scenario, the buying organisation (investment bank) must conduct various types of testing before the deployment of the software system. These tests can be functional testing, factory acceptance testing and/or user acceptance testing. The costs for all these types of testing are classified as acquisition costs with regards of total cost of ownership.
Reference: CIPS study guide page 150-152
LO 3, AC 3.1
C
Explanation:
In the scenario, the buying organisation (investment bank) must conduct various types of testing before the deployment of the software system. These tests can be functional testing, factory acceptance testing and/or user acceptance testing. The costs for all these types of testing are classified as acquisition costs with regards of total cost of ownership.
Reference: CIPS study guide page 150-152
LO 3, AC 3.1
Question #20
What is the stock turn for a store holding products to the value of £250,000 with annual sales of these products amounting to £1,000,000?
- A . 10
- B . 4
- C . 0.25
- D . 0.4
Correct Answer: B
B
Explanation:
Calculating Inventory Turnover (Stock Turn)
As with a typical turnover ratio, inventory turnover details how much inventory is sold over a period. To calculate the inventory turnover ratio, cost of goods (COGS) is divided by the average inventory for the same period.1
Cost of Goods Sold ÷ Average Inventory or Sales ÷ Inventory
In this exercise, the stock turn equal to sales divided by inventory, or 1,000,000:250,000 = 4.
Reference: CIPS study guide page 131
LO 2, AC 2.3
B
Explanation:
Calculating Inventory Turnover (Stock Turn)
As with a typical turnover ratio, inventory turnover details how much inventory is sold over a period. To calculate the inventory turnover ratio, cost of goods (COGS) is divided by the average inventory for the same period.1
Cost of Goods Sold ÷ Average Inventory or Sales ÷ Inventory
In this exercise, the stock turn equal to sales divided by inventory, or 1,000,000:250,000 = 4.
Reference: CIPS study guide page 131
LO 2, AC 2.3
Question #21
Which of the following is essential to effective implementation of just-in-time?
- A . Regular machine changeovers
- B . Larger warehouse for larger amount of inventory
- C . No need for smoothing production
- D . Strong links between the suppliers and the buying organisation
Correct Answer: D
D
Explanation:
For JIT manufacturing to succeed, companies must have steady production, high-quality workmanship, glitch-free plant machinery, and reliable suppliers.
JIT production systems cut inventory costs because manufacturers do not have to pay storage costs. Manufacturers are also not left with unwanted inventory if an order is canceled or not fulfilled.
Reference: – Just in Time (JIT)
– CIPS study guide page 122-124 LO 2, AC 2.3
D
Explanation:
For JIT manufacturing to succeed, companies must have steady production, high-quality workmanship, glitch-free plant machinery, and reliable suppliers.
JIT production systems cut inventory costs because manufacturers do not have to pay storage costs. Manufacturers are also not left with unwanted inventory if an order is canceled or not fulfilled.
Reference: – Just in Time (JIT)
– CIPS study guide page 122-124 LO 2, AC 2.3
Question #22
The amount of inventory available at the start of an accounting period is known as…?
- A . Buffer stock
- B . Work-in-progress
- C . Opening stock
- D . Closing stock
Correct Answer: C
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
Question #22
The amount of inventory available at the start of an accounting period is known as…?
- A . Buffer stock
- B . Work-in-progress
- C . Opening stock
- D . Closing stock
Correct Answer: C
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
Question #22
The amount of inventory available at the start of an accounting period is known as…?
- A . Buffer stock
- B . Work-in-progress
- C . Opening stock
- D . Closing stock
Correct Answer: C
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
Question #22
The amount of inventory available at the start of an accounting period is known as…?
- A . Buffer stock
- B . Work-in-progress
- C . Opening stock
- D . Closing stock
Correct Answer: C
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
Question #22
The amount of inventory available at the start of an accounting period is known as…?
- A . Buffer stock
- B . Work-in-progress
- C . Opening stock
- D . Closing stock
Correct Answer: C
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
C
Explanation:
Opening stock is the starting amount of inventory that a business has at a fixed moment in time. This could be the start of a financial year, another reporting period or ad hoc stocktake. The concept of opening stock mush not be confused with raw materials
Closing stock is the inventory held at the end of the period under consideration. Thus, the closing stock of one period is automatically the opening stock for the next.
Work in progress is the stock part-way through a manufacturing process; in the service sectors the term is also used for anything between order and delivery.
Buffer stock (safety stock) is the stock held as a contingency or insurance against disruption or unexpected demand.
LO 2, AC 2.1
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #27
To test the product durability
- A . 1 and 2 only
- B . 3 and 4 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: C
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
C
Explanation:
It would be really convenient if we could just hand our products directly to the customers, but that’s not possible. Packaging needs to be done for several reasons.
Here are some of the most prominent ones:
Question #36
There are no duplicate product codes
- A . 2 and 4 only
- B . 3 and 4 only
- C . 1 and 3 only
- D . 1 and 2 only
Correct Answer: C
C
Explanation:
The product code is often the key to obtaining documentation relating to products.
C
Explanation:
The product code is often the key to obtaining documentation relating to products.
Product codes are often use to link to internal processes. Some computerised inventory systems trigger alerts when specific items or volume are ordered – this could be an out-of-stock warning or potential volume errors.
In many cases, an organisation will use its own product code system. The organisation constructs a code that is effective and fits with its software and the variety of items covered. So these codes may or may not comply with any international standards (such as GS1 specifications, ISO standards, etc.). As organisations make up the code themselves, the codes may look identical to others.
For example, SKU414675 reveals that it is used for many items, including the following:
– A UK wholesaler’s six-pack of branded cola
– An Australian snack food
– UK flower seeds
– An Italian desk sold in Japan
– A Brazilian light fitting
Reference: CIPS study guide page 33-42
LO 1, AC 1.2
Question #37
Which of the following statements is true?
- A . All indirect supplies are independent demand items
- B . Number of independent demand items may be derived from the forecast
- C . Dependent demand items are not directly correlated with production rate
- D . Car engine is an example of independent demand items in a car assembly plant
Correct Answer: B
B
Explanation:
Dependent demand is the requirement for stock item which is directly related to and therefore de-pendent upon the rate of production (examples are: raw materials, components, energy). Independent demand is the requirement for stock item which is not directly related to, and is therefore independent of rate of production.
‘Number of independent demand items may be derived from the forecast’: Although independent demand is called thus, it can still be influenced by economic factors external to the demand-supply model such as general consumer sentiment and consumers’ available disposal income. However, businesses that need to predict the number of products with independent demand needed to sate their customers have it easier than businesses that must calculate the demand for products with dependent demand because there are fewer factors to consider.
‘Dependent demand items are not directly correlated with production rate’: As mentioned above, dependent demand items are directly correlated with production rate.
‘All indirect supplies are independent demand items’: Though most indirect supplier are inde-pendent demand, some are determined by the production rate, i.e. energy consumption of a major machinery.
‘Car engine is an example of independent demand items in a car assembly plant’: Car engine is a component in car which is the finished good of a car assembly plant, it is a dependent demand item. LO 2, AC 2.1
B
Explanation:
Dependent demand is the requirement for stock item which is directly related to and therefore de-pendent upon the rate of production (examples are: raw materials, components, energy). Independent demand is the requirement for stock item which is not directly related to, and is therefore independent of rate of production.
‘Number of independent demand items may be derived from the forecast’: Although independent demand is called thus, it can still be influenced by economic factors external to the demand-supply model such as general consumer sentiment and consumers’ available disposal income. However, businesses that need to predict the number of products with independent demand needed to sate their customers have it easier than businesses that must calculate the demand for products with dependent demand because there are fewer factors to consider.
‘Dependent demand items are not directly correlated with production rate’: As mentioned above, dependent demand items are directly correlated with production rate.
‘All indirect supplies are independent demand items’: Though most indirect supplier are inde-pendent demand, some are determined by the production rate, i.e. energy consumption of a major machinery.
‘Car engine is an example of independent demand items in a car assembly plant’: Car engine is a component in car which is the finished good of a car assembly plant, it is a dependent demand item. LO 2, AC 2.1
Question #38
Which of the following correctly describes the triple bottom line?
- A . Professional, Planet, Profit
- B . People, Planet, Project
- C . People, Product, Profit
- D . People, Planet, Profit
Correct Answer: D
D
Explanation:
The triple bottom line is a sustainability framework that examines a company’s social, environment, and economic impact (or People, Planet, Profit).
Reference:
– 25 Years Ago I Coined the Phrase “Triple Bottom Line.” Here’s Why It’s Time to Rethink It.
– CIPS study guide page 202
LO 3, AC 3.3
D
Explanation:
The triple bottom line is a sustainability framework that examines a company’s social, environment, and economic impact (or People, Planet, Profit).
Reference:
– 25 Years Ago I Coined the Phrase “Triple Bottom Line.” Here’s Why It’s Time to Rethink It.
– CIPS study guide page 202
LO 3, AC 3.3
Question #39
Which of the following should be considered when an organisation plans for disposing obsolescent and redundant stock? Select TWO that apply.
- A . Financial costs
- B . Economic order quantity
- C . ABC analysis
- D . Takt time
- E . Environmental issues
Correct Answer: A, E
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
Question #39
Which of the following should be considered when an organisation plans for disposing obsolescent and redundant stock? Select TWO that apply.
- A . Financial costs
- B . Economic order quantity
- C . ABC analysis
- D . Takt time
- E . Environmental issues
Correct Answer: A, E
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
Question #39
Which of the following should be considered when an organisation plans for disposing obsolescent and redundant stock? Select TWO that apply.
- A . Financial costs
- B . Economic order quantity
- C . ABC analysis
- D . Takt time
- E . Environmental issues
Correct Answer: A, E
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
Question #39
Which of the following should be considered when an organisation plans for disposing obsolescent and redundant stock? Select TWO that apply.
- A . Financial costs
- B . Economic order quantity
- C . ABC analysis
- D . Takt time
- E . Environmental issues
Correct Answer: A, E
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
Question #39
Which of the following should be considered when an organisation plans for disposing obsolescent and redundant stock? Select TWO that apply.
- A . Financial costs
- B . Economic order quantity
- C . ABC analysis
- D . Takt time
- E . Environmental issues
Correct Answer: A, E
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
A, E
Explanation:
If the planning and mitigation measures fail and redundant or obsolete stock is identified, it needs to be removed from the current inventory location as quickly as possible. There are some methods to deal with these types of stock. The worst case scenario is disposal to landfill, which is inadvisable if it can be avoided, both from environment point of view and the financial costs of such disposal.
For example, the problem of obsolete pesticides remains extremely serious and urgent. Many of the stocks identified continue to deteriorate thereby giving rise to an ever escalating source of severe pollution and posing a threat to human health, the environment and development in particular. To reduce the impact of obsolete pesticides on environment, FAO initiated a project in Yemen in which a total of 262 tonnes of obsolete pesticides were removed from 20 different sites and successfully disposed of between March and June 1996. The major field operation was completed in six weeks during which period almost all obsolete pesticides were brought to a central location and subsequently shipped to the United Kingdom for incineration.
Reference: CIPS study guide page 89
LO 2, AC 2.1
Question #44
Finished goods
- A . 1, 3 and 4
- B . 1, 2 and 4
- C . 2, 3 and 4
- D . 2, 3 and 4
Correct Answer: A
A
Explanation:
The normal breakdown in a manufacturing organisation would be raw materials, components, work in progress and finished goods.
Following are the different types of inventory:
A
Explanation:
The normal breakdown in a manufacturing organisation would be raw materials, components, work in progress and finished goods.
Following are the different types of inventory:
Raw materials are the basic materials that a manufacturing company buys from its suppliers, and that is used by the former to convert them into the final products by applying a set of manufacturing processes. For example, aluminum scrap is the raw material for a company that produces aluminum ingots. Flour is the raw material for a company that produces bread or pizza. Similarly, metal parts and ingots are the raw materials bought by a company that manufactures cars, and crude oil is the raw material for an oil refinery.
Work in progress inventory can also be called semi-finished goods. They are the raw materials that have been taken out of the raw materials store and are now undergoing the process of their conversion into the final products. These are the partly processed raw materials lying on the production floor. And they have also not reached the stage where they have been converted into the final product.
Finished goods are indeed the final products obtained after the application of the manufacturing processes on the raw materials and the semi-finished goods discussed above in the article. They are saleable, and their sale contributes fully to the revenue from the core operations of the company.
Reference: – Types of Inventory
– CIPS study guide page 82-83 LO 2, AC 2.1
Question #45
Do all types of warehouses require access to daylight to reduce the cost of electricity?
- A . No, because only ventilation can help to reduce the humidity in the warehouse
- B . No, because some types of stock are sensitive to sunlight
- C . Yes, because sunlight sterilises inventories in damp conditions
- D . Yes, because organisation’s need for artificial lighting and heating will reduce
Correct Answer: B
B
Explanation:
The design of a building should consider the advantages of natural light as this can reduce the cost of artificial lighting and improve the environmental performance of the building. Daylight entering the building can also help reduce heating costs. Unfortunately some stocks react badly to direct sunlight, and some stock reacts badly to extreme of temperature or may require a specific temperature for storage. Some stock may require a warmer temperature than the ambient temperature and other stocks may require cooler temperature. For example, fabric and garment are sensitive to direct sunlight as ultraviolet light catalyses a reaction between the water present in all fabrics and atmospheric oxygen to create hydrogen peroxide. This is a bleaching agent and breaks down the chemical bonds that give dyes their colour.
Reference: CIPS study guide page 12
LO 1, AC 1.1
B
Explanation:
The design of a building should consider the advantages of natural light as this can reduce the cost of artificial lighting and improve the environmental performance of the building. Daylight entering the building can also help reduce heating costs. Unfortunately some stocks react badly to direct sunlight, and some stock reacts badly to extreme of temperature or may require a specific temperature for storage. Some stock may require a warmer temperature than the ambient temperature and other stocks may require cooler temperature. For example, fabric and garment are sensitive to direct sunlight as ultraviolet light catalyses a reaction between the water present in all fabrics and atmospheric oxygen to create hydrogen peroxide. This is a bleaching agent and breaks down the chemical bonds that give dyes their colour.
Reference: CIPS study guide page 12
LO 1, AC 1.1
Question #46
MRP software is applied to schedule which of the following?
- A . Tax accounting
- B . Production processes
- C . Human resource management
- D . Executive meetings
Correct Answer: B
B
Explanation:
Material Requirements Planning (MRP) software manages material requirements for manufacturing processes.
LO 2, AC 2.3
B
Explanation:
Material Requirements Planning (MRP) software manages material requirements for manufacturing processes.
LO 2, AC 2.3
Question #47
Which of the following is the correct statement about total ordering cost?
- A . Rise as the average stock level rises
- B . Equal the number of orders placed times the cost of placing an order
- C . Rise as the order quantity rises
- D . Fall with the per period usage rate
Correct Answer: B
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
Question #47
Which of the following is the correct statement about total ordering cost?
- A . Rise as the average stock level rises
- B . Equal the number of orders placed times the cost of placing an order
- C . Rise as the order quantity rises
- D . Fall with the per period usage rate
Correct Answer: B
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
Question #47
Which of the following is the correct statement about total ordering cost?
- A . Rise as the average stock level rises
- B . Equal the number of orders placed times the cost of placing an order
- C . Rise as the order quantity rises
- D . Fall with the per period usage rate
Correct Answer: B
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
Question #47
Which of the following is the correct statement about total ordering cost?
- A . Rise as the average stock level rises
- B . Equal the number of orders placed times the cost of placing an order
- C . Rise as the order quantity rises
- D . Fall with the per period usage rate
Correct Answer: B
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
Question #47
Which of the following is the correct statement about total ordering cost?
- A . Rise as the average stock level rises
- B . Equal the number of orders placed times the cost of placing an order
- C . Rise as the order quantity rises
- D . Fall with the per period usage rate
Correct Answer: B
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
B
Explanation:
Typically, ordering costs include expenses for a purchase order, labor costs for the inspection of goods received, labor costs for placing the goods received in stock, labor costs for issuing a supplier’s invoice and labor costs for issuing a supplier payment. These costs are irrelevant from the size of the order and are incurred every time a firm places an order.
The total ordering cost will be equal to ordering cost per order multiply with number of orders.
Reference: CIPS study guide page 99-100
LO 2, AC 2.2
Question #52
Variability of lead time
- A . 1 and 3 only
- B . 1 and 2 only
- C . 2 and 4 only
- D . 3 and 4 only
Correct Answer: D
D
Explanation:
Safety stock is also known as buffer stock. As this name suggests, this type of stock provides some kind of ‘buffer’, which means safety stock will help the business to reduce the shocks induced by volatile demand or disruption on the supply chain. In other words, safety stock will reduces the probability of stockouts. The following graph would explain the reason why an organisation should have safety stock:
D
Explanation:
Safety stock is also known as buffer stock. As this name suggests, this type of stock provides some kind of ‘buffer’, which means safety stock will help the business to reduce the shocks induced by volatile demand or disruption on the supply chain. In other words, safety stock will reduces the probability of stockouts. The following graph would explain the reason why an organisation should have safety stock:
Figure 1: Safety stock graph
As it is only the buffer against uncertainty, safety stock level should be equal to the deviation of demand or replenishment time. Safety stock should be able to accommodate variance of demand and variance of lead time.
Reference:
– Safety stock explained
– CIPS study guide page 84-86 LO 2, AC 2.1
Question #53
ASI Ltd is known for its commitment to sustainability. ASI builds railroad ties and pilings using recycled plastic bottles and industrial waste instead of standard materials such as wood, steel, and cement. This practice helps the company save 15% in compare with traditional material purchases.
Which pillar of sustainability would include the practice of ASI Ltd?
- A . People and Planet
- B . Profit and Expense
- C . Planet and Profit
- D . Profit and People
Correct Answer: C
C
Explanation:
The triple bottom line is a sustainability framework that examines a company’s social, environment, and economic impact (or People, Planet, Profit). ASI Ltd practice would reduce the waste into the environment as well as keep the business more profitable. So the correct answer should be Planet and Profit.
Reference:
– 25 Years Ago I Coined the Phrase “Triple Bottom Line.” Here’s Why It’s Time to Rethink It.
– CIPS study guide page 202
LO 3, AC 3.3
C
Explanation:
The triple bottom line is a sustainability framework that examines a company’s social, environment, and economic impact (or People, Planet, Profit). ASI Ltd practice would reduce the waste into the environment as well as keep the business more profitable. So the correct answer should be Planet and Profit.
Reference:
– 25 Years Ago I Coined the Phrase “Triple Bottom Line.” Here’s Why It’s Time to Rethink It.
– CIPS study guide page 202
LO 3, AC 3.3
Question #54
GAP Ltd is a growing retail business. It spends a lot of money on buying stock for sale. However, the procurement process is still largely manual. This manual process contains a lot of tasks that are repeated for each procurement event and time consuming. The company management team decides to adopt procure-to-pay (P2P) software in order to eliminate duplicate activities and improve process efficiencies.
Which type of cost is GAP targeting?
- A . Holding costs
- B . Acquisition costs
- C . Disposal costs
- D . Cost of stockouts
Correct Answer: B
B
Explanation:
Costs of holding inventory include the following:
• Acquisition cost
• Inventory holding cost
• Costs of stock-outs
Acquisition costs follow the typical procure-to-pay model. Benefits of procure-to-Pay (P2P) software include:
– Vendor Management, which includes researching, selecting, engaging with, and evaluating the performance of suppliers who make up your supply chain.
– Purchase Requisition Workflows, or the formal process of creating and submitting a purchase requisition (PR) for approval to meet a specific business need.
– Purchase Order (PO) Workflows, covering the creation of a formal, detailed PO from the purchase requisition, including information on the quantity and quality of goods and services, as well as specific terms and conditions.
– Receiving, which includes the acceptance of physical goods (or review of quality and completion for services) and entering the accepted order into inventory, tracking, and accounting systems.
– Invoice Management, during which the invoice is compared to the original PO to verify pricing, quality, quantity, and terms have been met.
– Accounts Payable Workflows, wherein the accounts payable department processes the invoice for payment, submits the payment to the vendor, and reconciles any related financial entries in the accounting system.
The software is intended to help reduce the acquisition costs. LO 2, AC 2.2
B
Explanation:
Costs of holding inventory include the following:
• Acquisition cost
• Inventory holding cost
• Costs of stock-outs
Acquisition costs follow the typical procure-to-pay model. Benefits of procure-to-Pay (P2P) software include:
– Vendor Management, which includes researching, selecting, engaging with, and evaluating the performance of suppliers who make up your supply chain.
– Purchase Requisition Workflows, or the formal process of creating and submitting a purchase requisition (PR) for approval to meet a specific business need.
– Purchase Order (PO) Workflows, covering the creation of a formal, detailed PO from the purchase requisition, including information on the quantity and quality of goods and services, as well as specific terms and conditions.
– Receiving, which includes the acceptance of physical goods (or review of quality and completion for services) and entering the accepted order into inventory, tracking, and accounting systems.
– Invoice Management, during which the invoice is compared to the original PO to verify pricing, quality, quantity, and terms have been met.
– Accounts Payable Workflows, wherein the accounts payable department processes the invoice for payment, submits the payment to the vendor, and reconciles any related financial entries in the accounting system.
The software is intended to help reduce the acquisition costs. LO 2, AC 2.2
Question #55
A brewery sells its beer in aluminum cans. It recycles the cans by using contractors to collect and mold the used cans.
This is an example of…?
- A . Closed-loop recycling
- B . Carbon recycling
- C . Open-loop recycling
- D . Reuse
Correct Answer: A
A
Explanation:
There are two main processes of recycling C open loop recycling and closed loop recycling. Open Loop Recycling Open loop recycling is a method that delays disposal by converting manufactured goods and spent materials into both new raw materials, which can be used for a manufacturing purpose, as a fuel source for a different manufacturing process and waste products.
Typically, materials recycled through open-loop recycling will be used for purposes different from their original purpose.
This means that the input into the recycling process is converted to a new raw material, which can be used as an input into another manufacturing process.
Materials in an open loop recycling process are treated using various forms of treatment including
heat, chemical reactions, or physical crushing.
Closed Loop Recycling
Closed loop recycling is a process where waste is collected, recycled and then used again to make the same product it came from. This process is restorative and regenerative by design and aims to keep materials at their highest utility and value always.
Closed loop recycling is focused on resource sustainability, which means that recycling of a material can be done indefinitely without degradation of properties. In this case, conversion of the used product back to raw material allows repeated making of the same product, which helps hazardous waste generators reduce carbon footprint and achieve corporate sustainability initiatives.
Closed-loop recycling is common in specialized industries, such as the computer and battery industries, which use expensive or complex goods that cannot easily be broken down post-consumption into constituent materials.
A prime example of a closed-loop recycling process is the recycling of aluminum cans. Aluminum can be recycled to form new cans with little material degradation or waste creation.
Reference: – Open Loop Vs Closed Loop Recycling
– CIPS study guide page 203
LO 3, AC 3.3
A
Explanation:
There are two main processes of recycling C open loop recycling and closed loop recycling. Open Loop Recycling Open loop recycling is a method that delays disposal by converting manufactured goods and spent materials into both new raw materials, which can be used for a manufacturing purpose, as a fuel source for a different manufacturing process and waste products.
Typically, materials recycled through open-loop recycling will be used for purposes different from their original purpose.
This means that the input into the recycling process is converted to a new raw material, which can be used as an input into another manufacturing process.
Materials in an open loop recycling process are treated using various forms of treatment including
heat, chemical reactions, or physical crushing.
Closed Loop Recycling
Closed loop recycling is a process where waste is collected, recycled and then used again to make the same product it came from. This process is restorative and regenerative by design and aims to keep materials at their highest utility and value always.
Closed loop recycling is focused on resource sustainability, which means that recycling of a material can be done indefinitely without degradation of properties. In this case, conversion of the used product back to raw material allows repeated making of the same product, which helps hazardous waste generators reduce carbon footprint and achieve corporate sustainability initiatives.
Closed-loop recycling is common in specialized industries, such as the computer and battery industries, which use expensive or complex goods that cannot easily be broken down post-consumption into constituent materials.
A prime example of a closed-loop recycling process is the recycling of aluminum cans. Aluminum can be recycled to form new cans with little material degradation or waste creation.
Reference: – Open Loop Vs Closed Loop Recycling
– CIPS study guide page 203
LO 3, AC 3.3
Question #56
A hospital is purchasing a new software product that will advise nurses when to give medications to hospitalised patients. This is a mobile application that will be used on tablets carried by the nurses. The software is being developed and tested by a company that specialises in mobile medical applications. This software will interface with existing hospital software that orders the medications from the pharmacy.
Which acceptance test activity will be required to check whether the new software integrates well with current IT system?
- A . Health and safety testing
- B . Dry running
- C . Stress testing
- D . Compatibility testing
Correct Answer: D
D
Explanation:
In the scenario, one of the requirements for the new software is that the new one will interface with current system. Compatibility testing would be the most appropriate test here.
There are also other acceptance tests that are mentioned in L4M7 study guide:
– Health and safety test aims at establishing new health and safety routines, providing guidance notices and documentation and ensuring designed-in safety in operation.
– Stress testing (sometimes called torture testing) is a form of deliberately intense or thorough testing used to determine the stability of a given system, critical infrastructure or entity. It involves testing beyond normal operational capacity, often to a breaking point, in order to observe the results.
– A dry run (or a practice run) is a testing process where the effects of a possible failure are intentionally mitigated. For example, an aerospace company may conduct a "dry run" test of a jet’s new pilot ejection seat while the jet is parked on the ground, rather than while it is in flight.
The usage of "dry run" in acceptance procedures (for example in the so-called FAT = factory acceptance testing) is meant as following: the factory C which is a subcontractor C must perform a complete test of the system it has to deliver before the actual acceptance by customer.
Reference: CIPS study guide page 150-151 LO 3, AC 3.1
D
Explanation:
In the scenario, one of the requirements for the new software is that the new one will interface with current system. Compatibility testing would be the most appropriate test here.
There are also other acceptance tests that are mentioned in L4M7 study guide:
– Health and safety test aims at establishing new health and safety routines, providing guidance notices and documentation and ensuring designed-in safety in operation.
– Stress testing (sometimes called torture testing) is a form of deliberately intense or thorough testing used to determine the stability of a given system, critical infrastructure or entity. It involves testing beyond normal operational capacity, often to a breaking point, in order to observe the results.
– A dry run (or a practice run) is a testing process where the effects of a possible failure are intentionally mitigated. For example, an aerospace company may conduct a "dry run" test of a jet’s new pilot ejection seat while the jet is parked on the ground, rather than while it is in flight.
The usage of "dry run" in acceptance procedures (for example in the so-called FAT = factory acceptance testing) is meant as following: the factory C which is a subcontractor C must perform a complete test of the system it has to deliver before the actual acceptance by customer.
Reference: CIPS study guide page 150-151 LO 3, AC 3.1
Question #57
Among different types of costs associated with inventory, the costs of obtaining purchase approvals are…?
- A . Purchasing price
- B . Costs of stockouts
- C . Acquisition costs
- D . Holding costs
Correct Answer: C
C
Explanation:
Direct and indirect costs of holding inventory include the following:
– Acquisition costs: preparing the requisition, supplier selection and approvals, time and costs of the procurement process, etc.
– Holding costs
– Costs of stockouts
LO 2, AC 2.2
C
Explanation:
Direct and indirect costs of holding inventory include the following:
– Acquisition costs: preparing the requisition, supplier selection and approvals, time and costs of the procurement process, etc.
– Holding costs
– Costs of stockouts
LO 2, AC 2.2
Question #58
Which of the following refer to material used for filling the void left in the box but they have poor environmental profile?
- A . Polystyrene chips
- B . Cages
- C . Metal racking
- D . Polypropylene straps
Correct Answer: A
A
Explanation:
Void filling is the general term giving to the challenge of filling the space left in a box after the products have been packed. This means that if there is no void filling material, the product inside can move around and could be damaged.
Materials to fill voids to secure contents
• Polystyrene (PS) is a synthetic aromatic hydrocarbon polymer made from the monomer known as styrene.[5] Polystyrene can be solid or foamed. General-purpose polystyrene is clear, hard, and rather brittle. It is an inexpensive resin per unit weight. It is a rather poor barrier to oxygen and water vapour and has a relatively low melting point.[6] Polystyrene is one of the most widely used plastics, the scale of its production being several million tonnes per year.[7] Polystyrene can be naturally transparent, but can be coloured with colourants. Uses include protective packaging (such as packing peanuts and CD and DVD cases), containers, lids, bottles, trays, tumblers, disposable cutlery [6] and in the making of models. Polystyrene is generally considered to be non-biodegradable.
However, certain organisms are able to degrade it, albeit very slowly.
• Chips made of bio-degradable materials
• Absorbent and fire-resistant material
• Shredded paper, cardboard or wood-Based material
• Paper or cardboard rolls
• Bubble wrap
• Air-filled cushions
• Self expanding foam
Straps are used to group items into unit load. Polypropylene or polyester are the materials most often used. The wider the strap, the stronger it will be. Using more than one strap and straps for length and width will create a strong place for stock.
A
Explanation:
Void filling is the general term giving to the challenge of filling the space left in a box after the products have been packed. This means that if there is no void filling material, the product inside can move around and could be damaged.
Materials to fill voids to secure contents
• Polystyrene (PS) is a synthetic aromatic hydrocarbon polymer made from the monomer known as styrene.[5] Polystyrene can be solid or foamed. General-purpose polystyrene is clear, hard, and rather brittle. It is an inexpensive resin per unit weight. It is a rather poor barrier to oxygen and water vapour and has a relatively low melting point.[6] Polystyrene is one of the most widely used plastics, the scale of its production being several million tonnes per year.[7] Polystyrene can be naturally transparent, but can be coloured with colourants. Uses include protective packaging (such as packing peanuts and CD and DVD cases), containers, lids, bottles, trays, tumblers, disposable cutlery [6] and in the making of models. Polystyrene is generally considered to be non-biodegradable.
However, certain organisms are able to degrade it, albeit very slowly.
• Chips made of bio-degradable materials
• Absorbent and fire-resistant material
• Shredded paper, cardboard or wood-Based material
• Paper or cardboard rolls
• Bubble wrap
• Air-filled cushions
• Self expanding foam
Straps are used to group items into unit load. Polypropylene or polyester are the materials most often used. The wider the strap, the stronger it will be. Using more than one strap and straps for length and width will create a strong place for stock.
Reference:
– Polystyrene (Wikipedia)
– CIPS study guide page 65 LO 1, AC 1.3
Question #59
In the periodic review system, the order quantity is the same for each order. Is this statement true?
- A . No, the next order quantity must be larger than the previous one
- B . No, the inventory position at each review point differs from each other
- C . Yes, in periodic review system items are reviewed when the Kanban is triggered
- D . Yes, the order quantity should be equal to economic order quantity
Correct Answer: B
B
Explanation:
Fixed-Time Period System (or Periodic Review system) is the inventory management system in which
inventory is checked in fixed time periods, T, and the quantity ordered varies. The system also
contains a target inventory level, R, which is restored when order received.
The order quantity is calculated as:
Q=RCIP
where: Q = order quantity
R = target inventory level
IP = inventory position
Inventory position (IP) is equal to inventory on-hand plus quantity on order minus backorder (if any) The order quantity varies because the inventory position at each review point differs from each other.
B
Explanation:
Fixed-Time Period System (or Periodic Review system) is the inventory management system in which
inventory is checked in fixed time periods, T, and the quantity ordered varies. The system also
contains a target inventory level, R, which is restored when order received.
The order quantity is calculated as:
Q=RCIP
where: Q = order quantity
R = target inventory level
IP = inventory position
Inventory position (IP) is equal to inventory on-hand plus quantity on order minus backorder (if any) The order quantity varies because the inventory position at each review point differs from each other.
LO 2, AC 2.3
Question #60
An organisation always obtains negative cash flow regarding removal and disposal of assets. Is this statement true?
- A . No, the organisation may recover the value of the assets by reselling it
- B . Yes, the organisation incurs high maintenance cost during the disposal processes
- C . Yes, some assets require enormous decommissioning costs
- D . No, disposal of assets always bring positive cash flow to the organisation
Correct Answer: A
A
Explanation:
Assets in their end of life need to be removed or disposed. Though an organisation can incur some costs in decommissioning or removal of the assets, it may recover costs by reselling the assets. Therefore, sometimes the organisation can gain positive cash flow from removal and disposal of assets. The answer should be "No, the organisation may recover the value of the assets by reselling it".
LO 3, AC 3.3
A
Explanation:
Assets in their end of life need to be removed or disposed. Though an organisation can incur some costs in decommissioning or removal of the assets, it may recover costs by reselling the assets. Therefore, sometimes the organisation can gain positive cash flow from removal and disposal of assets. The answer should be "No, the organisation may recover the value of the assets by reselling it".
LO 3, AC 3.3
Question #61
Which of the following allow an organisation to have more flexible space for storage by leveraging the facilities of other parties? Select TWO that apply.
- A . Eliminating dead stock or inventory
- B . Temporary warehousing
- C . Installing double-deep pallet racking
- D . Consignment stocking
- E . Adopting carousel-type storage
Correct Answer: B, D
B, D
Explanation:
Temporary warehousing (or ‘Very short-term warehousing’) is offered in the market where organization makes their requirements for space open online to offers or bids for available space. This appears to be an emerging market and service providers in the UK and USA typically quote a price per pallet per week with some also requiring a ‘transaction fee’ for movements of each pallet in and out.
Consignment stocking is a facility offered by a supplier to a buyer to allow a delivery of stock to the buyer with payment only after it is used or sold to a customer.
Double-deep pallet racking and carousel-style storage are two tools that leverage space within a warehouse:
Double-deep pallet rack
B, D
Explanation:
Temporary warehousing (or ‘Very short-term warehousing’) is offered in the market where organization makes their requirements for space open online to offers or bids for available space. This appears to be an emerging market and service providers in the UK and USA typically quote a price per pallet per week with some also requiring a ‘transaction fee’ for movements of each pallet in and out.
Consignment stocking is a facility offered by a supplier to a buyer to allow a delivery of stock to the buyer with payment only after it is used or sold to a customer.
Double-deep pallet racking and carousel-style storage are two tools that leverage space within a warehouse:
Double-deep pallet rack
Carousel style storage
Reference: CIPS study guide page 31
LO 1, AC 1.1
Question #62
Bulk loose coal that requires massive handling system should be stored in which area?
- A . Chill hub
- B . Stockyard
- C . Heating warehouse
- D . Store
Correct Answer: B
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
LO 1, AC 1.1
Question #62
Bulk loose coal that requires massive handling system should be stored in which area?
- A . Chill hub
- B . Stockyard
- C . Heating warehouse
- D . Store
Correct Answer: B
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
LO 1, AC 1.1
Question #62
Bulk loose coal that requires massive handling system should be stored in which area?
- A . Chill hub
- B . Stockyard
- C . Heating warehouse
- D . Store
Correct Answer: B
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
LO 1, AC 1.1
Question #62
Bulk loose coal that requires massive handling system should be stored in which area?
- A . Chill hub
- B . Stockyard
- C . Heating warehouse
- D . Store
Correct Answer: B
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
LO 1, AC 1.1
Question #62
Bulk loose coal that requires massive handling system should be stored in which area?
- A . Chill hub
- B . Stockyard
- C . Heating warehouse
- D . Store
Correct Answer: B
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
B
Explanation:
Materials that will not easily deteriorate, are generally stored in open or fairly covered areas
(stockyard). The materials are usually in bulk, like steel plates or coils casting, timber coal, steel barrels, cable drums, piping, lampposts, lorries, etc.
Stockyards are open or semi-covered areas that are used for the following:
– Bulk loose or packaged materials
– Bulky or oversized items that may be difficult to move inside
– Materials that may require specialised handling, loading or unloading
Below image shows the example of a stockyard that stores loose coal and its handling system.
LO 1, AC 1.1
Question #67
Overall inventory turnover
- A . 2 and 4 only
- B . 1 and 4 only
- C . 2 and 3 only
- D . 1 and 3 only
Correct Answer: C
C
Explanation:
ABC analysis is applied to stock and its management. It is based loosely on the Pareto principles, better known as 80/20 rule. Pareto principle is the theory that 80% of outcome results from 20% of
inputs. For example, 80% of sales are to the top 20% of customers; 80% of spend on inventory is accounted for by the top 20% of stock items.
The ABC concept is based on Pareto’s law.
The following steps are carried out for the ABC analysis.
– Step 1: Compute the annual usage value for every item in the sample by multiplying the annual requirements by the cost per unit.
– Step 2: Arrange the items in descending order of the usage value calculated above.
– Step 3: Make a cumulative total of the number of items and the usage value.
– Step 4: Convert the cumulative total of the number of items and usage values into a percentage of their grand totals.
– Step 5: Draw a graph connecting cumulative % items and cumulative % usage value. The graph is divided approximately into three segments, where the curve sharply changes its shape. This indicates the three segments A, B and C.
LO 2, AC 2.1
C
Explanation:
ABC analysis is applied to stock and its management. It is based loosely on the Pareto principles, better known as 80/20 rule. Pareto principle is the theory that 80% of outcome results from 20% of
inputs. For example, 80% of sales are to the top 20% of customers; 80% of spend on inventory is accounted for by the top 20% of stock items.
The ABC concept is based on Pareto’s law.
The following steps are carried out for the ABC analysis.
– Step 1: Compute the annual usage value for every item in the sample by multiplying the annual requirements by the cost per unit.
– Step 2: Arrange the items in descending order of the usage value calculated above.
– Step 3: Make a cumulative total of the number of items and the usage value.
– Step 4: Convert the cumulative total of the number of items and usage values into a percentage of their grand totals.
– Step 5: Draw a graph connecting cumulative % items and cumulative % usage value. The graph is divided approximately into three segments, where the curve sharply changes its shape. This indicates the three segments A, B and C.
LO 2, AC 2.1
Question #68
“A measure of the ability of an organisation to supply customers without delay” is the best defini-tion of which of the following:
- A . Re-order level
- B . Service level
- C . Key performance indicator
- D . Safety stock
Correct Answer: B
B
Explanation:
In inventory management, service level is the expected probability of not hitting a stock-out during the next replenishment cycle or the probability of not losing sales.
Key performance indicators (KPIs) can be used to analyse data based on performance objectives and set actionable goals for improvement. KPIs can be developed in conjunction with suppliers as well as others, and can be used to measure the essential elements of the process.
Safety stock is the amount of inventory a business needs to have to achieve a certain level of risk mitigation when it comes to stockouts.
Reorder level (or reorder point) is the inventory level at which a company would place a new order
or start a new manufacturing run.
Reference: CIPS study guide page 131
LO 2, AC 2.3
B
Explanation:
In inventory management, service level is the expected probability of not hitting a stock-out during the next replenishment cycle or the probability of not losing sales.
Key performance indicators (KPIs) can be used to analyse data based on performance objectives and set actionable goals for improvement. KPIs can be developed in conjunction with suppliers as well as others, and can be used to measure the essential elements of the process.
Safety stock is the amount of inventory a business needs to have to achieve a certain level of risk mitigation when it comes to stockouts.
Reorder level (or reorder point) is the inventory level at which a company would place a new order
or start a new manufacturing run.
Reference: CIPS study guide page 131
LO 2, AC 2.3
Question #69
Which of the following is NOT an improvement available in ERP II in compare with ERP?
- A . ERP II systems are closed and silo-working
- B . ERP II enables the organisation to collaborate with trading partners across the supply chain
- C . ERP II crosses all sectors and segments of business, including service, government and asset-based industries
- D . ERP II offers better integration with other proprietary software
Correct Answer: A
A
Explanation:
The main improvements from ERP to ERP II are the following:
– ERP II is web enabled as compared to Conventional ERP Which is not.
– ERP is restricted to provide selected exhaustive or rigorous or wide-spread coverage in its mod-ules. But as compared to ERP, ERP II provides the true and accurate blend of the macro and the micro and affords customers with curative actions/measures after identifying the slip-up/error or fault;
– ERP was embattled more headed for manufacturing or industrialization and the dilemma or difficulty is conquer in ERP II by endowing clarification for all kind of industries and sectors.
– ERP is not in the position or could not possibly integrate/incorporate diverse functions from di-verse departments/divisions but ERP II could possibly do so as well as from different industries as compared to conventional ERP.
– For WEB and WAP connectivity ERP II grip CRM and SCM Functionalities.
– ERP II be obliged the function and purpose to an external/outdoor one and smooth the progress of better networks than remaining as internal/interior application.
Reference:
– Next Generation Enterprise Resource Planning: ERP II
– CIPS study guide page 119-122
LO 2, AC 2.3
A
Explanation:
The main improvements from ERP to ERP II are the following:
– ERP II is web enabled as compared to Conventional ERP Which is not.
– ERP is restricted to provide selected exhaustive or rigorous or wide-spread coverage in its mod-ules. But as compared to ERP, ERP II provides the true and accurate blend of the macro and the micro and affords customers with curative actions/measures after identifying the slip-up/error or fault;
– ERP was embattled more headed for manufacturing or industrialization and the dilemma or difficulty is conquer in ERP II by endowing clarification for all kind of industries and sectors.
– ERP is not in the position or could not possibly integrate/incorporate diverse functions from di-verse departments/divisions but ERP II could possibly do so as well as from different industries as compared to conventional ERP.
– For WEB and WAP connectivity ERP II grip CRM and SCM Functionalities.
– ERP II be obliged the function and purpose to an external/outdoor one and smooth the progress of better networks than remaining as internal/interior application.
Reference:
– Next Generation Enterprise Resource Planning: ERP II
– CIPS study guide page 119-122
LO 2, AC 2.3
Question #70
Which of the following is a forecasting technique?
- A . LIFO
- B . Moving average
- C . Time-weighted series
- D . ABC analysis
Correct Answer: B
B
Explanation:
Last in, first out (LIFO) is a method used to account for inventory that records the most recently produced items as sold first. Under LIFO, the cost of the most recent products purchased (or produced) are the first to be expensed as cost of goods sold (COGS)―which means the lower cost of older products will be reported as inventory.
Moving average: a calculation to analyse data by creating series of averages of different subset of full data set. It is commonly used with time series data to smooth out short-term fluctuation and highlight long-term trends or cycle
ABC analysis is a method of analysis that divides the subject up into three categories: A, B and C.
There is no technique called time-weighted series.
LO 2, AC 2.3
B
Explanation:
Last in, first out (LIFO) is a method used to account for inventory that records the most recently produced items as sold first. Under LIFO, the cost of the most recent products purchased (or produced) are the first to be expensed as cost of goods sold (COGS)―which means the lower cost of older products will be reported as inventory.
Moving average: a calculation to analyse data by creating series of averages of different subset of full data set. It is commonly used with time series data to smooth out short-term fluctuation and highlight long-term trends or cycle
ABC analysis is a method of analysis that divides the subject up into three categories: A, B and C.
There is no technique called time-weighted series.
LO 2, AC 2.3
Question #71
Which type of codes can a barcode laser scanner (linear scanner) read?
- A . Numerical code
- B . QR code
- C . Aztec code
- D . 1D barcode
Correct Answer: D
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
LO 1, AC 1.2
Question #71
Which type of codes can a barcode laser scanner (linear scanner) read?
- A . Numerical code
- B . QR code
- C . Aztec code
- D . 1D barcode
Correct Answer: D
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
LO 1, AC 1.2
Question #71
Which type of codes can a barcode laser scanner (linear scanner) read?
- A . Numerical code
- B . QR code
- C . Aztec code
- D . 1D barcode
Correct Answer: D
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
LO 1, AC 1.2
Question #71
Which type of codes can a barcode laser scanner (linear scanner) read?
- A . Numerical code
- B . QR code
- C . Aztec code
- D . 1D barcode
Correct Answer: D
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
LO 1, AC 1.2
Question #71
Which type of codes can a barcode laser scanner (linear scanner) read?
- A . Numerical code
- B . QR code
- C . Aztec code
- D . 1D barcode
Correct Answer: D
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
D
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spacings
of parallel lines. These include some of the most traditional and well-recognized barcode types, such
as the UPC and EAN codes. 1D barcodes are also commonly referred to as linear barcodes.
Two-dimensional (2D) barcodes look like squares or rectangles that contain many small, individual dots. QR codes, Data matrix and Aztec codes are examples of 2D barcodes Numerical code contains all numbers, no letters
There are two different scan engine types (laser scanner versus imager) for interpreting the information provided in the barcode. Many companies producing the technology capable of reading the barcode data uses the term “scanning” regardless of the type of scan engine used. For the purposes of these FAQs, we are trying to draw a clearer distinction for you.
Linear (1D) codes can be scanned with a traditional laser scanner. A laser scan engine uses a laser and mirror to create the bar that scans the information. 1D barcode scanners will only interpret the linear barcode scanning technology. 1D barcode scanners are typically less expensive since the type of encryptions they can decode is limited.
LO 1, AC 1.2
Question #76
Autonomous maintenance
- A . 1 and 3 only
- B . 2 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: B
B
Explanation:
Total productive maintenance (TPM) is an innovative concept in the manufacturing industry that evolved from the idea of preventive maintenance to adopt practices of productive maintenance, maintenance prevention, and reliability Engineering.
What we now refer to as TPM, has become an ingenious approach to achieve overall equipment effectiveness by involving the workforce behind the machines (i.e. the operators).
8 pillars of TPM
B
Explanation:
Total productive maintenance (TPM) is an innovative concept in the manufacturing industry that evolved from the idea of preventive maintenance to adopt practices of productive maintenance, maintenance prevention, and reliability Engineering.
What we now refer to as TPM, has become an ingenious approach to achieve overall equipment effectiveness by involving the workforce behind the machines (i.e. the operators).
8 pillars of TPM
1) 5S – Sort, straighten, shine, standardize, and sustain
Just like a physical structure starts with a grounded framework, building a strong TPM process requires a strong foundation in the form of the principles of 5S. This is a workplace organization method that is simplified into 5 basic steps:
Sort tools, equipment, and materials to identify which of these can be discarded
Straighten and set things in proper order to reduce unnecessary motion and efficiently travel be-tween working groups and locations
Shine refers to performing necessary housekeeping to clean up the work area
Standardize and schedule activities to systematically form the habits to keep the workplace orga-nized
Sustain the process and principles for long-term applications
The 5S approach provides a systematic approach to cleaning the workplace, thereby uncovering underlying problems and challenges.
2) Autonomous maintenance
Maintenance tasks and caring for equipment should start with the people using the equipment. The empowerment of operators to work on small maintenance tasks effectively allows the maintenance teams to focus on more specialized assignments.
3) Continuous improvement
Also known as the Japanese term Kaizen, Continuous Improvement promotes the attitude of pro-gressing towards zero losses and zero defects. Through small but continual tweaks to processes, the overall effectiveness and efficiency of the organization is developed.
4) Planned maintenance
Planned maintenance activities are essential to the prevention of equipment breakdown. Planned maintenance is performed by periodically evaluating the condition of equipment to proactively prevent deterioration and mechanical failures.
5) Quality maintenance
To ensure the satisfaction of the customer, manufacturing processes aim for zero-defect production. Standards for superior quality, and checks on whether the standards are being met, should be in place. The goal of quality maintenance is to identify any possible causes of deviations from zero-defect production.
6) Training
The idea of TPM is that everyone does their part to contribute to the overall productivity of the production process. In order to achieve optimum performance, and to build each member’s competence, proper training is required to equip each one with the theoretical and practical know-how of working with machines and equipment.
7) Office TPM
A key role that is often overlooked is the administrative department that works behind the scenes. Like the rest of the production teams and processes, the management and administrative functions are also subject to productivity improvement. Tins includes identifying and eliminating losses, and contributing to the overall performance of the plant.
8) Safety, health, and environment
The last of the eight pillars focuses on creating a safe workplace. The essence of this pillar is real-ized
when actively applied to each of the other pillars. The successful implementation of this pillar will
contribute to a secure and hazard-free workplace.
Reference:
Total Productive Maintenance (TPM) – Upkeep
CIPS study guide page 163
LO 3, AC 3.1
Question #77
Which of the following is the Japanese word for ‘billboard’ or ‘signboard’?
- A . Muda
- B . Kaizen
- C . Poka-Yoke
- D . Kanban
Correct Answer: D
D
Explanation:
Kanban ( 看板 ) (signboard or billboard in Japanese) is a scheduling system for lean manufacturing and just-in-time manufacturing (JIT).
Poka-yoke ( ポカヨケ , [poka yoke]) is a Japanese term that means "mistake-proofing" or "inadvertent
error prevention". A poka-yoke is any mechanism in any process that helps an equipment operator avoid (yokeru) mistakes (poka). Its purpose is to eliminate product defects by preventing, correcting, or drawing attention to human errors as they occur.
Kaizen is a concept referring to business activities that continuously improve all functions and involve all employees from the CEO to the assembly line workers. Kaizen ( 改善 ) is the Sino-Japanese word
for "improvement". Kaizen also applies to processes, such as purchasing and logistics, that cross organizational boundaries into the supply chain.
Muda ( oj , on’yomi reading) is a Japanese word meaning "futility; uselessness; wastefulness", and
is a key concept in lean process thinking, like the Toyota Production System (TPS) as one of the three types of deviation from optimal allocation of resources (the others being mura and muri). Waste reduction is an effective way to increase profitability.
Reference: CIPS study guide page 124
LO 2, AC 2.3
D
Explanation:
Kanban ( 看板 ) (signboard or billboard in Japanese) is a scheduling system for lean manufacturing and just-in-time manufacturing (JIT).
Poka-yoke ( ポカヨケ , [poka yoke]) is a Japanese term that means "mistake-proofing" or "inadvertent
error prevention". A poka-yoke is any mechanism in any process that helps an equipment operator avoid (yokeru) mistakes (poka). Its purpose is to eliminate product defects by preventing, correcting, or drawing attention to human errors as they occur.
Kaizen is a concept referring to business activities that continuously improve all functions and involve all employees from the CEO to the assembly line workers. Kaizen ( 改善 ) is the Sino-Japanese word
for "improvement". Kaizen also applies to processes, such as purchasing and logistics, that cross organizational boundaries into the supply chain.
Muda ( oj , on’yomi reading) is a Japanese word meaning "futility; uselessness; wastefulness", and
is a key concept in lean process thinking, like the Toyota Production System (TPS) as one of the three types of deviation from optimal allocation of resources (the others being mura and muri). Waste reduction is an effective way to increase profitability.
Reference: CIPS study guide page 124
LO 2, AC 2.3
Question #78
Which of the following is the material handling equipment which uses the suction force to lift an item?
- A . Vacuum lifter
- B . Sack truck
- C . Dolly
- D . Pallet stacker
Correct Answer: A
A
Explanation:
VACUUM LIFTER uses the vacuum pad which attaches itself to a product. The suction force al-lows the product to be lifted (and rotated and placed). Vacuum lifters are used for moving and positioning glass sheets, but are also seen lifting boxes, plastic sacks, sheets of building materials and pipework. Some models feature hydraulic arms which allow easy movement of the lifted load. The lifting system will have a number of sucker pads and vacuum capability which determines the maximum weights and largest items that can be lifted.
A
Explanation:
VACUUM LIFTER uses the vacuum pad which attaches itself to a product. The suction force al-lows the product to be lifted (and rotated and placed). Vacuum lifters are used for moving and positioning glass sheets, but are also seen lifting boxes, plastic sacks, sheets of building materials and pipework. Some models feature hydraulic arms which allow easy movement of the lifted load. The lifting system will have a number of sucker pads and vacuum capability which determines the maximum weights and largest items that can be lifted.
DOLLY consists of stack and sets of wheels (either casters or rollers) under the stack that allow the dolly and the heavy object on top of it to move easily and smoothly. For moving in a straight line, rollers is ideal. If you want to move maneuverability, dolly with sets of casters will let you swivel and turn.
SACK TRUCK (hand truck) is an L-shaped box-moving handcart. It comprises a small base plat-form with two wheels at the base and a larger vertical structure. A small ledge to set objects on flat against the floor when the sack truck is upright. When moving, the truck and object are then tilted backward based on the vertical structure until the weight is balanced over the large wheels, making otherwise bulky and heavy objects easier to move.
PALLET STACKER is designed to lift and stack pallets. This one is fully mobile so can move easily around the warehouse. An operator would typically sit or stand while driving like a counter-balanced, reach or straddle lift truck.
LO 1, AC 1.3
Question #79
Which of the following best describes the relationship between a service level and safety stock?
- A . A safety stock is not always required to achieve a required service level
- B . A service level decreases in proportion to a decrease in safety stock
- C . When safety stock is zero the service level always equals zero.
- D . A service level increases in proportion to an increase in safety stock
Correct Answer: D
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
Question #79
Which of the following best describes the relationship between a service level and safety stock?
- A . A safety stock is not always required to achieve a required service level
- B . A service level decreases in proportion to a decrease in safety stock
- C . When safety stock is zero the service level always equals zero.
- D . A service level increases in proportion to an increase in safety stock
Correct Answer: D
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
Question #79
Which of the following best describes the relationship between a service level and safety stock?
- A . A safety stock is not always required to achieve a required service level
- B . A service level decreases in proportion to a decrease in safety stock
- C . When safety stock is zero the service level always equals zero.
- D . A service level increases in proportion to an increase in safety stock
Correct Answer: D
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
Question #79
Which of the following best describes the relationship between a service level and safety stock?
- A . A safety stock is not always required to achieve a required service level
- B . A service level decreases in proportion to a decrease in safety stock
- C . When safety stock is zero the service level always equals zero.
- D . A service level increases in proportion to an increase in safety stock
Correct Answer: D
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
Question #79
Which of the following best describes the relationship between a service level and safety stock?
- A . A safety stock is not always required to achieve a required service level
- B . A service level decreases in proportion to a decrease in safety stock
- C . When safety stock is zero the service level always equals zero.
- D . A service level increases in proportion to an increase in safety stock
Correct Answer: D
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
D
Explanation:
Safety stock is an additional quantity of an item held in the inventory to reduce the risk of stockouts, which may be caused by fluctuations in supply or demand. Generally, as you increase the safety stock, the service level, which represents the expected probability of not hitting a stockout, also increases. This is because having more safety stock can help in accommodating unexpected surges in demand, thereby maintaining a higher service level.
Now, let’s evaluate each option:
Question #84
P2P system
- A . 2 and 3 only
- B . 1 and 3 only
- C . 2 and 4 only
- D . 1 and 4 only
Correct Answer: D
D
Explanation:
There are several methods to reduce the acquisition costs in procurement. L4M7 study guide lists the following methods:
– Buyer discretionary spend
– ‘User buying’
– Vendor managed inventory (VMI)
– Two-bin Kanban
– Product catalogue
– e-Procurement techniques, including some systems such as ERP, procure-to-pay (P2P), e-requisition, e-tendering, etc.
– Procurement cards
Reference: CIPS study guide page 155-156
LO 3, AC 3.1
D
Explanation:
There are several methods to reduce the acquisition costs in procurement. L4M7 study guide lists the following methods:
– Buyer discretionary spend
– ‘User buying’
– Vendor managed inventory (VMI)
– Two-bin Kanban
– Product catalogue
– e-Procurement techniques, including some systems such as ERP, procure-to-pay (P2P), e-requisition, e-tendering, etc.
– Procurement cards
Reference: CIPS study guide page 155-156
LO 3, AC 3.1
Question #85
Which of the following best defines ‘exponential moving average’?
- A . A forecasting technique where the average is calculated by dividing the sum of the val-ues by the number of values
- B . A process by which the reorder of an item is triggered by the inventory level dropping to a
predetermined level - C . A process by which a decision is taken at a period end or review point to determine how much to reorder
- D . A forecasting technique where each demand is multiplied by a weighting factor
Correct Answer: D
D
Explanation:
An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight
and significance on the most recent data points. The exponential moving average is also referred to
as the exponentially weighted moving average. An exponentially weighted moving average reacts
more significantly to recent price changes than a simple moving average (SMA), which applies an
equal weight to all observations in the period.
Reference: CIPS study guide page 111-112
LO 2, AC 2.3
D
Explanation:
An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight
and significance on the most recent data points. The exponential moving average is also referred to
as the exponentially weighted moving average. An exponentially weighted moving average reacts
more significantly to recent price changes than a simple moving average (SMA), which applies an
equal weight to all observations in the period.
Reference: CIPS study guide page 111-112
LO 2, AC 2.3
Question #86
Among different types of costs associated with inventory, the opportunity cost of the investment tied up in inventory belongs to which of the following?
- A . Acquisition costs
- B . Purchase price
- C . Holding costs
- D . Costs of stockouts
Correct Answer: C
C
Explanation:
Direct and indirect costs of holding inventory include the following:
– Acquisition costs
– Holding costs: There are 2 different types of holding costs: costs related to the value of the goods (including opportunity costs, costs of insurance, losses due to product deterioration, etc) and costs related to the physical characteristics of this inventory.
– Costs of stockouts
Reference: CIPS study guide page 100-101
LO 2, AC 2.2
C
Explanation:
Direct and indirect costs of holding inventory include the following:
– Acquisition costs
– Holding costs: There are 2 different types of holding costs: costs related to the value of the goods (including opportunity costs, costs of insurance, losses due to product deterioration, etc) and costs related to the physical characteristics of this inventory.
– Costs of stockouts
Reference: CIPS study guide page 100-101
LO 2, AC 2.2