APICS CPIM - Part 1 Module 5 Exam Questions With 100% Correct Answers

APICS CPIM - Part 1 Module 5 Exam Questions With 100% Correct Answers Inventory on the balance sheet at the end of the last year was $5,000,000. Inventory at the end of this year was $4,000,000. Last year's annual cost of goods sold (COGS) was $3,000,000. This year's annual COGS was $2,300,000. What is this year's inventory turnover? - answer0.511 times EXPLANATION: Inventory Turnover = Annual COGS/Average Inventory in Dollars. Average Inventory = (Inventory at Period Start + Inventory at Period End)/2. Since the inventory at the end of the last year will be the same as the inventory at the beginning of this year, it can be used when calculating average inventory. Average Inventory for this year: ($5,000,000 + $4,000,000)/2 = $4,500,000. Inventory Turnover = $2,300,000/$4,500,000 = 0.511 times. Which is a function of physical distribution? - answerThe activities of physical distribution include transportation, distribution inventory, warehousing, material handling, and protective packaging. What is the term for the difference between sales and cost of goods sold for an organization? - answerGross profit margin Which financial statement shows a company's debt? - answerBalance Sheet Which is a positive benefit that can be realized by implementing a new raw material ordering system that reduces the total lead time of in-transit inventory by a full day? - answerRaw material inventory levels held at the plant for decoupling purposes can be reduced. Which accounting method for valuing inventory estimates total cost, including allocated overhead, to produce a batch of goods divided by the total number of units produced? - answerAverage cost Safety stock depends on which of the following? - answerVariability of demand Finished goods being shipped from one facility to another is considered which type of inventory? - answerIn-transit On a balance sheet, assets are $1 million. If liabilities are $600,000, what is owners' equity? - answer$400,000 How is inventory turnover calculated? - answerCost of Goods Sold/Average Inventory Investment What is true in relation to cash flows and work-in-process (WIP) inventory? - answerLabor, materials, and overhead immediately become accounts payable or wages payable. A manufacturer is experiencing a delay in raw materials delivery; the materials will arrive a week later than expected. As a result, the manufacturer must adjust its level of safety stock. The company needs 85 units of safety stock to meet its customer service level. If the original lead time was six weeks, what is the new level of safety stock required? - answer92 EXPLANATION: The new level of safety stock is equal to the old level of safety stock multiplied by the square root of the new lead time divided by the old lead time—in this case, 85 times the square root of 7/6), or 85 times 1.08 = 92 (rounded). Which organizational objectives are often tradeoffs with one another? - answerTargeted level of customer service and low-cost plant operation When is finished goods safety stock or its equivalent needed least? - answerFor a popular line of make-to-order garage doors. Which of the following statements is true when production lead time is increased? - answerWork-in-process inventory will increase. What is the term for the target costs of an operation, process, or product including direct material, direct labor, and overhead charges? - answerStandard costs Which category of expenses on an income statement includes the costs of general managers, computer systems, research and development, and others? - answerGeneral and administrative expenses Which type of inventories are used in production but do not end up in the final product? - answerMaintenance, repair, and operating supplies. Which of the following is a form of inventory buildup to buffer against some event that may not happen? - answerHedge inventory Which inventory function exists because of the time needed to move goods from one location to another? - answerTransportation A printing firm maintains a high level of paper safety stock. This is likely because of: - answervariability of demand. There are currently 5,000 hydraulic door closers in stock, and analysts project that there will be sales of 58,500 this year. If this turns out to be true, how many days of supply are currently on hand? - answer31.2 days EXPLANATION: Days of Supply = Inventory on Hand/Average Daily Usage. To determine average daily usage, divide the annual usage by 365: 58,500/365 = 160.274. Days of Supply = 5,000/160.274 = 31.197, rounded to 31.2 days. Which is a correct financial accounting equation? - answerOwners' Equity = Assets - Liabilities Which of the following types of costs is related to the clerical work of preparing, releasing, monitoring, and receiving orders, the physical handling of goods, inspections, and setup? - answerOrdering cost Trying to achieve the lowest production cost possible would likely conflict with which of the following scenarios? - answerBreaking into a production run to make product needed for a customer Which of the following is a key customer service performance indicator for most companies? - answerOn-time schedule performance An order has been placed and approved for delivery in two months' time. The factory produces the product at a steady rate, meaning that days of supply are stable. What lot-sizing technique could be used to achieve appropriate levels of supply in this situation? Answers - answerPeriod order quantity Stock Keeping Unit (SKU) - answerIdentifies the same size and type of item at a particular stock keeping location. For example, televisions unboxed for display and the same models still in boxes are the same units at the same location. A typical order of cellphones contains 200 handsets. In a given year, demand for these handsets is 5,000. How many orders would need to be fulfilled each year to meet demand? - answer25 EXPLANATION: