CIPS L4M7 LO2 Exam Questions and Answers.
What is opening stock? - ANS the inventory held at the start of an accounting period
What is stock take? - ANS an audit check of the stock physically held; this may be by
amount or value, or both
What are finished goods? - ANS products ready for sale and/or use
What is work in progress? - ANS in inventory management the expression relates to
stock part-way through a manufacturing process; in the services sectors the term is also
used to describe anything between order and delivery
What is closing stock? - ANS the inventory held at the end of an accounting period;
becomes the opening stock for the next period
What are raw materials? - ANS the basic inputs to manufacturing a product, usually
unprocessed or having had very little pre-processing, for example metals, minerals,
timber and fibers
What are components? - ANS manufactured items bought in to include in a larger final
product, for example, exhaust systems for vehicles
What is redundancy? - ANS the state of being no longer needed or surplus to
requirements
What is obsolescence? - ANS the process of becoming outdated
What is safety stock? - ANS stock held as a contingency or insurance against disruption
or unexpected demand
What is stock out? - ANS having no or insufficient materials to continue production or
the finished goods to meet an order
What is obsolescent stock? - ANS usually finished goods, which is in good condition but
for which demand is irreversibly falling towards zero. Once this demand reaches zero, it
cannot be used or sold in its current state.
What is redundant stock? - ANS there is potential demand for it, just not from the
current or intended user. It can be redirected to other users in its current form. It can be
thought of as 'over-supply' in its current location
What are the causes of obsolescence? - ANS - technological change
- Cultural change
- Legislation
, What are the causes of redundancy? - ANS - poor forecasting of demand
- Weak customer relationships leading to cancelled orders. Orders may also be
cancelled for other reasons well outside the supplier’s control
- Overstocking/poor stock control
- Change in internal policy
What are the ways to avoid redundant or obsolete stock? - ANS - good market
knowledge and accurate forecasting
- Good stock control techniques, including regular stock audits to identify slower-moving
stock
- good inter-departmental communication so that the impacts of policy changes can be
identified in good time and accommodated by running down stocks prior to changes
being made or allowing for a phasing of the change
- Just in time supply chains
- reduced batch sizes in production
- Good sales and operating planning (S&OP)
What are direct supplies? - ANS supplies that are integrated into the finished product
What are indirect supplies? - ANS supplies not incorporated in the finished product but
which keep the business and factory operating
What is the pare to principle? - ANS the theory that 80% of the outcomes result from
20% of the inputs
How often do you manage category a stock? - ANS the most closely managed and
controlled with daily actions
How often do you manage category B stock? - ANS require less attention with weekly or
monthly checks
How often do you manage category C stock? - ANS ordered as required with frequent
orders and often large batch sizes
What is dependent demand? - ANS the requirement for a stock item which is directly
related to the rate of production e.g. raw materials, components, energy
What is independent demand? - ANS the requirement for a stock item which is not
directly related to the rate of production e.g. machinery spares, office equipment and
consumables
What is liquidity? - ANS the ease with which assets can be converted into cash. A firm
with a high-value asset base but low liquidity may struggle to meet its debts on time
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