Free CIPS L4M7 Practice Exam with Questions & Answers | Set: 4

Explanation

Stockout is a situation where an inventory item is not available when required. The costs associated with a stockout include the following:

- Lost of production output - there will be no production until the stockout is resolved (new stock is acquired). For factory operating 24/7 with no spare capacity, this lost output will not be able to be recovered.

- Costs of machine downtime and of overhead spread over a reduced level of output

- Costs of any action required to deal with the stockout...

- Loss of customer goodwill through inability to supply or late delivery

- Loss of sales or new orders

- Loss of market creditability

Explanation

Maintenance can represent a significant portion of the cost in asset intensive organisations (such as Sidel - a food processor), as breakdowns have an impact on the capacity, quality and cost of operation. However, the formulation of a maintenance strategy depends on a number of factors, including the cost of down time, reliability characteristics and redundancy of assets. Consequently, the balance between preventive maintenance (PM) and corrective maintenance (CM) for minimising costs varies between organisations and assets. Nevertheless, there are some rules of thumb on the balance between PM and CM, such as the 80/20 rule.

Preventive maintenance is a type of proactive maintenance, while corrective maintenance is an example of reactive maintenance. Therefore, the answer should be "Balance between proactive maintenance and reactive maintenance".

Explanation

Obsolescent stock is stock, usually finished goods, which is in good condition and satisfactory working but for which demand is irreversibly falling towards zero. Once this demand reaches zero the stock canbe considered 'obsolete'. It cannot be used or sold in its current state. Food ingredients (like candy canes) which are out of date are another example.

Explanation

A master production schedule (MPS) is a plan for individual commodities to be produced in each time period such as production, staffing, inventory, etc.[1] It is usually linked to manufacturing where the plan indicates when and how much of each product will be demanded.[2] 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. Typical MPSs are created by software with user tweaking.

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.

Explanation

In the scenario, one of the requirements for the new software is that the new one will interface with current system. Compatibility testing would be the most appropriate test here.

There are also other acceptance tests that are mentioned in L4M7 study guide:

- Health and safety test aims at establishing new health and safety routines, providing guidance notices and documentation and ensuring designed-in safety in operation.

- Stress testing (sometimes called torture testing) is a form of deliberately intense or thorough testing used to determine the stability of a given system, critical infrastructure or entity. It involves testing beyond normal operational capacity, often to a breaking point, in order to observe the results.

- A dry run (or a practice run) is a testing process where the effects of a possible failure are inten-tionally mitigated. For example, an aerospace company may conduct a "dry run" test of a jet's new pilot ejection seat while the jet is parked on the ground, rather than while it is in flight.

The usage of "dry run" in acceptance procedures (for example in the so-called FAT = factory ac-ceptance testing) is meant as following: the factory – which is a subcontractor – must perform a complete test of the system it has to deliver before the actual acceptance by customer.

Explanation

Mounting or embedding RFID tags on metal can be tricky. Metal surfaces reflect energy emitted from RFID readers and create interference for RFID tag antennas, which means the tag isn't able to receive power and transmit information; however, specific RFID tags will work around metal sur-faces. RFID companies have patented technology that allows RFID to work when attached to metal surfaces and even embedded within metal products. As long as you choose the correct RFID equipment for your environment and application, you won't need to worry about interference from metal.

Explanation

Dependent demand is the requirement for stock item which is directly related to and therefore de-pendent upon the rate of production (examples are: raw materials, components, energy).

Independent demand is the requirement for stock item which is not directly related to, and is therefore independent of rate of production.

'Number of independent demand items may be derived from the forecast': Although independent demand is called thus, it can still be influenced by economic factors external to the demand-supply model such as general consumer sentiment and consumers' available disposal income. However, businesses that need to predict the number of products with independent demand needed to sate their customers have it easier than businesses that must calculate the demand for products with dependent demand because there are fewer factors to consider.

'Dependent demand items are not directly correlated with production rate': As mentioned above, dependent demand items are directly correlated with production rate.

'All indirect supplies are independent demand items': Though most indirect supplier are inde-pendent demand, some are determined by the production rate, i.e. energy consumption of a major machinery.

'Car engine is an example of independent demand items in a car assembly plant': Car engine is a component in car which is the finished good of a car assembly plant, it is a dependent demand item.

LO 2, AC 2.1