APICS CPIM Part 1, Module 5|Complete With
A+ Graded 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?
0.511 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?
The 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?
Gross profit margin
Which financial statement shows a company's debt?
Balance 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?
Raw 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?
Average cost
Safety stock depends on which of the following?
Variability of demand
Finished goods being shipped from one facility to another is considered which type of inventory?
In-transit
On a balance sheet, assets are $1 million. If liabilities are $600,000, what is owners' equity?
$400,000
How is inventory turnover calculated?
Cost of Goods Sold/Average Inventory Investment
What is true in relation to cash flows and work-in-process (WIP) inventory?
Labor, 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?
92
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?
Targeted level of customer service and low-cost plant operation
When is finished goods safety stock or its equivalent needed least?
For a popular line of make-to-order garage doors.
Which of the following statements is true when production lead time is increased?
Work-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?
Standard costs
Which category of expenses on an income statement includes the costs of general managers,
computer systems, research and development, and others?
General and administrative expenses
Which type of inventories are used in production but do not end up in the final product?
Maintenance, repair, and operating supplies.
Which of the following is a form of inventory buildup to buffer against some event that may not
happen?
Hedge inventory
Which inventory function exists because of the time needed to move goods from one location to
another?
Transportation
A printing firm maintains a high level of paper safety stock. This is likely because of:
variability 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?
31.2 days
A+ Graded 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?
0.511 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?
The 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?
Gross profit margin
Which financial statement shows a company's debt?
Balance 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?
Raw 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?
Average cost
Safety stock depends on which of the following?
Variability of demand
Finished goods being shipped from one facility to another is considered which type of inventory?
In-transit
On a balance sheet, assets are $1 million. If liabilities are $600,000, what is owners' equity?
$400,000
How is inventory turnover calculated?
Cost of Goods Sold/Average Inventory Investment
What is true in relation to cash flows and work-in-process (WIP) inventory?
Labor, 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?
92
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?
Targeted level of customer service and low-cost plant operation
When is finished goods safety stock or its equivalent needed least?
For a popular line of make-to-order garage doors.
Which of the following statements is true when production lead time is increased?
Work-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?
Standard costs
Which category of expenses on an income statement includes the costs of general managers,
computer systems, research and development, and others?
General and administrative expenses
Which type of inventories are used in production but do not end up in the final product?
Maintenance, repair, and operating supplies.
Which of the following is a form of inventory buildup to buffer against some event that may not
happen?
Hedge inventory
Which inventory function exists because of the time needed to move goods from one location to
another?
Transportation
A printing firm maintains a high level of paper safety stock. This is likely because of:
variability 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?
31.2 days
