[Sep-2023] Pass CIPS L4M7 Exam in First Attempt Guaranteed!
Full L4M7 Practice Test and 135 unique questions with explanations waiting just for you, get it now!
NEW QUESTION # 20
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. Holding costs
- C. Purchase price
- D. Costs of stockouts
Answer: B
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:
LO 2, AC 2.2
NEW QUESTION # 21
A manufacturer is making a plan for strategic safety stock. To do so, they must analyse the proba-bility of a stock out occurring and the cost impacts if it does. Which of the following are typical costs the manufacturer may incur in 'out of stock' event? Select TWO that apply.
- A. Costs of handling inventory
- B. Costs for qualifying suppliers
- C. Cost of equipment downtime
- D. Extra costs for urgent transportation
Answer: C,D
Explanation:
Costs of approving the requisition
Explanation:
The costs of stockouts - the costs of being out of inventory - include:
- Loss of production output
- Costs of idle time and of fixed overheads spread over a reduced level of output
- Costs of any action taken to deal with the stockout, such as buying from another stockist at an enhanced price, switching production, obtaining substitute materials
- Loss of customer goodwill due to the inability to supply or late delivery.
(Procurement and Supply Chain management - 9th Edition, K.
Lysons and B. Farrington, 2016) LO 2, AC 2.2
NEW QUESTION # 22
Among different types of costs associated with inventory, the costs of obtaining purchase approvals are...?
- A. Holding costs
- B. Acquisition costs
- C. Purchasing price
- D. Costs of stockouts
Answer: B
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
NEW QUESTION # 23
Which of the following are most likely the benefits of using unit loads? Select TWO that apply.
Increase transport time of each item
- A. Unit loads must be placed on pallets
- B. Reduce handling cost of one unit
- C. Minimise space utilisation
- D. Safer handling
Answer: B,D
Explanation:
The concept of a unit load is to create a stable and secure, easy-to-move group of stock that is fast to load and unload from vehicles.
The advantages of unit load concepts are as the following:
* More items can be handled at the same time, thereby reducing the number of trips required and, potentially, reducing handling costs, loading and unloading times, and product damage.
* Enables the use of standardized material handling equipment.
Reference:
LO 1, AC 1.3
NEW QUESTION # 24
Which one of the following statements is true about radio frequency identification (RFID)?
- A. RFID tags require laser scanning.
- B. Normally passive RFID tags store ID numbers
- C. A passive RFID tag does not use an antenna
- D. An active RFID tag does not require a power source
Answer: B
Explanation:
Radio frequency identification (RFID) are items which use radio technology to identify itself and its location subject to having appropriate hardware and software.
RFID tags are made of three different components: an RFID chip, which is an integrated circuit (IC), an antenna, and a substrate.
A RFID Reader is a device that uses radio-frequency waves to wirelessly transfer data between itself and a RFID tag/label in order to identify, categorize and track assets. When combined with the right RFID software, a RFID reader can identify objects quicker, more accurately, at a reduced overall cost, and at various points of the object's lifecycle.
Passive RFID systems use tags with no internal power source and instead are powered by the electromagnetic energy transmitted from an RFID reader. Passive RFID tags are used for applica-tions such as access control, file tracking, race timing, supply chain management, smart labels, and more.
Active RFID systems have three essential parts - a reader or interrogator, antenna, and a tag. Ac-tive RFID tags possess their own power source - an internal battery that enables them to have ex-tremely long read ranges as well as large memory banks.
Reference:
LO 1, AC 1.2
NEW QUESTION # 25
Which type of codes can a barcode laser scanner (linear scanner) read?
- A. Aztec code
- B. Numerical code
- C. 1D barcode
- D. QR code
Answer: C
Explanation:
One-dimensional (or 1D) barcodes systematically represent data by varying the widths and spac-ings 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 infor-mation 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
NEW QUESTION # 26
Which of the following is the formula for calculating the re-order level?
- A. Average usage in a lead-time + Required level of safety stock
- B. Required level of safety stock - Average usage in a lead-time
- C. Required level of safety stock x Average usage in a lead-time.
- D. Average usage in a lead-time / Required level of safety stock
Answer: A
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
Reference:
LO 2, AC 2.3
NEW QUESTION # 27
MRP system is the most suitable IT system to manage which type of items?
- A. Dependent demand
- B. Independent demand
- C. Fast moving components
- 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 # 28
Which of the following refer to material used for filling the void left in the box but they have poor environmental profile?
- A. Metal racking
- B. Cages
- C. Polystyrene chips
- D. Polypropylene straps
Answer: C
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, tum-blers, 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
NEW QUESTION # 29
Which of the following best describes available inventory (also known as inventory position)?
- A. The amount of inventory on hand plus the amount of inventory on order
- B. The amount of inventory on hand
- C. The amount of inventory on hand in excess of expected demand
- D. The amount of inventory on order only
Answer: A
Explanation:
Available inventory (or Inventory position - IP) is equal to inventory on-hand plus quantity on order minus backorder (if any) Reference:
LO 2, AC 2.3
NEW QUESTION # 30
When purchasing a capital asset, an organisation should analyse the costs and benefits that the asset may bring. Which of the following factors are considered in cost-benefit analysis? Select TWO that apply.
- A. The cumulative cash flows generated by the asset
- B. Current liabilities in the balance sheet
- C. Dividends paid
- D. The cost of the asset
- E. Shareholders' equity
Answer: A,D
Explanation:
A cost-benefit analysis is a process businesses use to analyze decisions (such as capital investment). The business or analyst sums the benefits of a situation or action and then subtracts the costs associated with taking that action.
A cost-benefit analysis (CBA) should begin with compiling a comprehensive list of all the costs and benefits associated with the project or decision.
The costs involved in a CBA might include the following:
- Direct costs would be direct labor involved in manufacturing, inventory, raw materials, manufacturing expenses.
- Indirect costs might include electricity, overhead costs from management, rent, utilities.
- Intangible costs of a decision, such as the impact on customers, employees, or delivery times.
- Opportunity costs such as alternative investments, or buying a plant versus building one.
- Cost of potential risks such as regulatory risks, competition, and environmental impacts.
Benefits might include the following:
- Revenue and sales increases from increased production or new product.
- Intangible benefits, such as improved employee safety and morale, as well as customer satisfaction due to enhanced product offerings or faster delivery.
- Competitive advantage or market share gained as a result of the decision.
An analyst or project manager should apply a monetary measurement to all of the items on the cost-benefit list, taking special care not to underestimate costs or overestimate benefits. A conservative approach with a conscious effort to avoid any subjective tendencies when calculating estimates is best suited when assigning a value to both costs and benefits for a cost-benefit analysis.
Finally, the results of the aggregate costs and benefits should be compared quantitatively to deter-mine if the benefits outweigh the costs. If so, then the rational decision is to go forward with the project. If not, the business should review the project to see if it can make adjustments to either increase benefits or decrease costs to make the project viable. Otherwise, the company should likely avoid the project.
Reference:
- Cost-Benefit Analysis (Investopedia)
- CIPS study guide page 175
LO 3, AC 3.2
NEW QUESTION # 31
Objective forecasting techniques must be based on which of the following?
1. Opinions
2. Figures
3. Facts
4. Jugdement
- A. 1 and 4 only
- B. 1 and 2 only
- C. 3 and 4 only
- D. 2 and 3 only
Answer: D
Explanation:
Subjective forecasting uses qualitative methods (surveys, opinions) which relay on perception and opinion. Objective forecasting uses quantitative methods (facts and figures). Both methods have to make assumption about how closely (or not) the future will resemble the present and the past. Forecasting is never exact.
Reference:
LO 2, AC 2.3
NEW QUESTION # 32
Which of the following is an assumption of economic-order-quantity model?
- A. No inventory stockouts occur
- B. The purchasing cost per unit is affected by the order quantity
- C. Demand, ordering costs, and carrying costs are uncertain
- D. The quantity ordered can vary at each reorder point
Answer: A
Explanation:
Economic order quantity (EOQ) model is the method that provides the company with an order quantity. This order quantity figure is where the record holding costs and ordering costs are mini-mized. By using this model, the companies can minimize the costs associated with the ordering and inventory holding. In 1913, Ford W.
Harris developed this formula whereas R. H. Wilson is given credit for the application and in-depth analysis on this model.
If the economic order quantity model is applied, the following assumptions should be met:
- The rate of demand is constant, and total demand is known in advance.
- The ordering cost is constant.
- The unit price of inventory is constant, i.e., no discount is applied depending on order quantity.
- Delivery time is constant.
- Replacement of defective units is instantaneous.
- There is no safety stock level, i.e., the minimum stock level is zero.
- Restocking is made by the whole batch.
Because the demand and lead time are constant, no stockout events can occur.
Reference:
LO 2, AC 2.3
NEW QUESTION # 33
Which of the following are subjective forecasting techniques? Select TWO that apply.
- A. Cycle counting
- B. Test marketing
- C. Delphi method
- D. Pareto principle
Answer: B,C
Explanation:
Weighted moving average
Explanation:
The most common subjective forecasting techniques include the following:
- Market surveys
- Employee surveys
- Expert knowledge (Delphi method is a method using expert knowledge)
- Test marketing
Cycle counting is a periodic analysis of inventory in a storage location which is conducted through the counting of samples instead of physically counting the entire inventory available, so as to quickly have an accurate estimate of the inventory available without causing a stop to the day to day working as is the case with physically counting every unit.
The Pareto principle (also known as the 80/20 rule, the law of the vital few, or the principle of fac-tor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.
Weighted moving averages assign a heavier weighting to more current data points since they are more relevant than data points in the distant past. The sum of the weighting should add up to 1 (or 100 percent).
Reference:
LO 2, AC 2.3
NEW QUESTION # 34
MRP software is a powerful tool for managing material requirements of manufacturing processes. To keep the software function well, an organisation must have appropriate input dat a. Which of the following are the inputs of MRP software? Select THREE that apply.
- A. Facilities management
- B. Capacity requirement plan
- C. Inventory records
- D. Master production schedule
- E. Payrolls information
- F. Bill of materials
Answer: C,D,F
Explanation:
A powerful benefit of MRP system is the capacity to produce exception reports, which show deviations from normal planning and performance. These enable anomalies to be investigated with a view to improve future forecasting.
Material requirement planning is an electronic system for combining the following:
- Known demand
- Forecast demand. Known demand and forecasted demand are shown in master production schedule.
- Bill of materials for the final product
- Inventory records
Reference:
LO 2, AC 2.3
NEW QUESTION # 35
Which of the following is a main objective of just-in-time?
- A. Leveraging economic order quantity
- B. Higher safety stock
- C. Waste reduction
- D. Better demand forecasting
Answer: C
Explanation:
JIT, often referred to as the Toyota production system (TPS), originated in Toyota's manufacturing plants in Japan in the early 1970s. It was first introduced by the organisation's owner, Taiichi Ohno. The prime goal of JIT is the achievement of zero inventories.
The just-in-time objectives of eliminating waste can be summarised in the 'five zeros: zero defects, zero set-up times, zero inventories, zero handling and zero lead times.
Reference:
LO 2, AC 2.3
NEW QUESTION # 36
Which of the following should be considered when an organisation plans for disposing obsolescent and redundant stock? Select TWO that apply.
- A. Economic order quantity
- B. Financial costs
- C. ABC analysis
- D. Environmental issues
- E. Takt time
Answer: B,D
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:
LO 2, AC 2.1
NEW QUESTION # 37
......
Get Latest L4M7 Dumps Exam Questions in here: https://prep4sure.dumpsfree.com/L4M7-valid-exam.html