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NEW QUESTION # 48
Buffer stock is a level of stock which...
- A. Is half of the actual stock that needs to be in the warehouse
- B. Is when the physical ordering process should start to replenish used items
- C. Is the minimum stock level below which actual stock should not fall
- D. Is the maximum stock in inventory
Answer: C
NEW QUESTION # 49
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. 0.25
- B. 0
- C. 1
- D. 0.4
Answer: C
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:
LO 2, AC 2.3
NEW QUESTION # 50
International Standard Book Number (ISBN) is a unique international identification system for each product form or edition of a monographic publication published or produced by a specific publisher. ISBN is an example of...?
- A. Harmonized system
- B. Check digit
- C. Industry standard code
- D. Own product code system
Answer: C
Explanation:
The International Standard Book Number (ISBN) is a numeric commercial book identifier which is intended to be unique. Publishers purchase ISBNs from an affiliate of the International ISBN Agency. ISBN is standardised by ISO 2108:2017. ISBN is an example of industry standard code as it applies to commercial books around the world.
Check digits are additional numbers or characters added to codes that a computer uses to verify the number is valid. The intention is to reduce the likelihood of miskeying an item and hitting an alternative live item. More often, a system is devised which a computer can calculate using combination of numbers.
Own product code system: an organisation will use its own product code system. This has the ad-vantage that the organisation can construct a code that is effective and fits with its software and variety of items covered.
The Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature is an internationally standardized system of names and numbers to classify traded products. It came into effect in 1988 and has since been developed and maintained by the World Customs Organization (WCO) (formerly the Customs Co-operation Council), an independent intergovernmental organization based in Brussels, Belgium, with over 200 member countries.
Reference:
LO 1, AC 1.2
NEW QUESTION # 51
"A measure of the ability of an organisation to supply customers without delay" is the best defini-tion of which of the following:
- A. Safety stock
- B. Re-order level
- C. Service level
- D. Key performance indicator
Answer: C
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.
NEW QUESTION # 52
Hi-Tech Products Inc. (HTP) has just opened a new state-of-the-art distribution centre. It has invested heavily in new technology that will help manage, store, and identify stock items and their locations quickly and continuously. Its investment uses wireless technology. HTP will be using which of the following?
- A. Radio Frequency Identification (RFID)
- B. ABC classification management
- C. Handheld scanning devices
- D. Barcodes
Answer: A
NEW QUESTION # 53
A procurement manager has agreed a contract for the acquisition of a piece of capital equipment and has negotiated a staged payment contract of 30% with order, 30% on delivery, and the remaining 40% on acceptance testing. Was this the right thing to do?
- A. No, as it is an unfair contract term and places the supplier at a disadvantage in the contract
- B. No, as it commits the organisation to purchasing the equipment and the supplier to deliver it
- C. Yes, as it means the contract warranties are easier to change
- D. Yes, as the payments can be linked directly to a specific performance milestone of the contract
Answer: D
NEW QUESTION # 54
XYZ Ltd has been adopting MRP system for years. The system helps the company improve effi-ciency greatly and generates huge cost-savings. However, MRP system is only limited to produc-tion 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. MPS
- B. ERP
- C. MRP II
- D. P2P
Answer: B
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 con-tinuously 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
NEW QUESTION # 55
Which of the following is the formula for calculating the re-order level?
- A. Required level of safety stock x Average usage in a lead-time.
- B. Average usage in a lead-time / Required level of safety stock
- C. Average usage in a lead-time + Required level of safety stock
- D. Required level of safety stock - Average usage in a lead-time
Answer: C
Explanation:
In management accounting, reorder level (or reorder point) is the inventory level at which a com-pany would place a new order or start a new manufacturing run.
Reorder level depends on a company's work-order lead time and its demand during that time and whether the company maintain a safety stock.
If a company maintains a safety stock, reorder level calculation changes are follows:
Reorder Level = Average Demand × Lead Time + Safety Stock
NEW QUESTION # 56
MRP system is the most suitable IT system to manage which type of items?
- A. Dependent demand
- B. Fast moving components
- C. Independent demand
- D. Construction projects
Answer: A
Explanation:
Material requirement planning (MRP) is a production planning and material (inventory) control system used in manufacturing. Objectives of MRP are to ensure materials are available for production while minimising inventory and to plan production and procurement activities.
Bill of materials (BOM) is an important component of MRP. BOM is also known as product struc-turer. This lists all the items that comprise each assembly and sub-assembly that make up the final product or end item. Therefore, MRP is commonly used to manage dependent demand stock.
Reference:
LO 2, AC 2.3
NEW QUESTION # 57
A computer in a warehouse prompts an operator to pick a list of the items associated with an order. After picking the items, the operator scans them. The computer reads the items to ensure that the correct items are picked and adjusts the inventory levels. Which of the following order tracking technology is used in this warehouse operation?
- A. Global positioning system
- B. Bar coding system
- C. Electronic data interchange
- D. Enterprise resource planning
Answer: B
Explanation:
A bar coding system enables operators to scan items as they are picked, updating inventory levels in real- time. This system minimizes errors and ensures efficient inventory tracking. In whole-life asset management, barcoding helps maintain accurate records, reduces picking errors, and improves warehouse productivity.
NEW QUESTION # 58
The only reason stocks become obsolete is because items have been held in stock for a very long time. Is this a valid statement?
- A. Yes, because all obsolete items result from significant overstocking
- B. No, because stock held for a long time are called buffer stocks
- C. No, because some items can become obsolete because of changes in consumer needs
- D. Yes, because users assume that the items are no longer in stock
Answer: C
NEW QUESTION # 59
Which of the following is essential to effective implementation of just-in-time?
- A. Strong links between the suppliers and the buying organisation
- B. Larger warehouse for larger amount of inventory
- C. No need for smoothing production
- D. Regular machine changeovers
Answer: A
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.
NEW QUESTION # 60
Resevoir Inc runs several oil refineries across the country. These refineries require heavy invest-ment, particularly in maintenance, repair and operating (MRO) inventory. But the inventory turno-ver rate of these MRO items are low, while some items have expired date, which increases the risks of obsolescence. Which of the following methods can address the issues of these MRO items?
- A. Just in case
- B. Vendor-owned stock
- C. Larger safety stock
- D. Forrester effect
Answer: B
Explanation:
Where stock turn (inventory turnover) is low and there are potential risks of redundancy or obsolescence, the buying organisation may adopt vendor owned stock. In this system, a supplier (vendor) maintains a stock of items ready to be used at the point of customer consumption. The supplier owns the stock until it is used by the purchaser; only then is the purchaser invoiced for it.
Just in case and larger safety stock would significantly increase the stock level, which may cause redundancy or obsolescence.
Forrester effect (or Bullwhip effect) is a distribution channel phenomenon in which forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in customer demand as one moves further up the supply chain.
Reference:
LO 2, AC 2.2
NEW QUESTION # 61
Your employers have expanded rapidly over the past five years and have acquired a number of smaller companies in the same industry. Unfortunately, all of the companies purchased have manual inventory systems. Your employer is setting up a computerised inventory control system and wishes to ensure that all stock is classified under the appropriate headings. Under what classification would semi-finished goods be classified?
- A. Material costs
- B. Acquisition costs
- C. Indirect inventories
- D. Direct inventories
Answer: D
NEW QUESTION # 62
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
Answer: 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 ac-ceptance 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:
LO 3, AC 3.1
NEW QUESTION # 63
Radio Frequency Identification (RFID) is an electronic technology that transmits data from tagged items.
What are the advantages of RFID technology? SelectTWOthat apply.
- A. RFID technology can be detected by both portable and fixed readers
- B. RFID technology can cause a tag collision when numerous tags in the same area respond simultaneously
- C. RFID technology is very small and holds limited information
- D. RFID technology uses barcodes but is not limited by distance from the item location
- E. RFID technology can operate in a harsh physical environment
Answer: A,E
NEW QUESTION # 64
A central distribution warehouse receives deliveries from several suppliers of bread and cakes on pallets in large quantities. These deliveries need to be separated into smaller individual consignments for delivery to retail stores operated by the bakery company. The division of the large quantities into smaller consignments is called:
- A. Small orders
- B. Cross-docking
- C. Breaking bulk
- D. Retail stocking
Answer: C
Explanation:
Breaking bulk is the process of dividing large shipments of goods into smaller lots for easier distribution.
This is a standard practice in warehousing and logistics to facilitate delivery to various locations or end users.
Unlike cross-docking, which involves minimal storage time, breaking bulk focuses on redistributing large shipments into smaller, manageable batches. In whole-life asset management, breaking bulk helps maintain streamlined operations and reduces holding costs by ensuring goods are moved efficiently and without prolonged storage.
NEW QUESTION # 65
Under a Hire Purchase Agreement, ownership is transferred to the hirer...
- A. when half the installments have been paid
- B. when all installments have been paid
- C. if the items are damaged by the hirer
- D. at the beginning of the contract
Answer: B
Explanation:
In a Hire Purchase Agreement, ownership of the asset transfers only after all installments are fully paid.
This financing option allows organizations to use an asset immediately while spreading out payments. In whole-life asset management, hire purchase is suitable for assets with long service lives, allowing organizations to use them without a large initial investment.
NEW QUESTION # 66
XYZ Inc opens a tender to purchase new forklift trucks for their new established warehouse. In the final round, there are two suppliers remain who offer two different bids. Supplier A's bid has high initial investment. After calculating the net present value, the NPV in year five is positive. On the other hand, supplier B's bid has low purchase price, with the NPV in year five is negative. If the NPV is the sole selection criterion, XYZ Inc should select the bid which has...?
- A. The lowest NPV
- B. Negative NPV
- C. Positive NPV
- D. Zero NPV
Answer: 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. Net Present Value is a helpful tool for assessing the total lifetime value of an investment.
Procurement professionals or investors can base on this value to make decision to achieve value for money.
Generally, an organisation should select the offer which has the highest NPV among their options. Preferably, the NPV of an capital investment should be positive, which means the investment eventually adds value to the business.
NEW QUESTION # 67
U-shape flow layout can utilise handling equipment if the high demands items locate adjacent to shipping docks. Is this statement true?
- A. Yes, because U-shape layout allows S-line routing more efficient
- B. No, because cross-docking is impossible in U-shape flow warehouse
- C. Yes, because this layout places receiving docks and despatch docks close to one another
- D. No, because aisles between racks in U-shape flow are too small for any handling equipment
Answer: C
Explanation:
A 'U' flow occurs when the goods receipt and dispatch functions are located at the same end of a warehouse building.
Products flow in at receiving, move in to storage in the back of the warehouse, and then to shipping, which is located at the adjacent to receiving on the same side of the building.
Items with higher throughput level are located closer to the loading bays. An example of a 'U' flow design can be seen in the diagram below.
Advantages of 'U' Flow
- Excellent utilization of dock resources because the receiving and shipping processes can share dock doors
- Facilitating cross-docking because the receiving and shipping docks are adjacent to one another and may be co-mingled
- Excellent lift truck utilization because put away and retrieval trips are easily combined and be-cause the storage locations closest to the receiving and shipping docks are natural locations to house fast moving items
- Yields excellent security because there is a single side of the building used for entry and exit
NEW QUESTION # 68
Which of the following are examples of subjective methods of forecasting? SelectTWOthat apply.
- A. Moving averages
- B. Trend line analysis
- C. Market research
- D. Seasonal variations
- E. Expert opinion
Answer: C,E
NEW QUESTION # 69
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