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CIPS Whole Life Asset Management Sample Questions (Q29-Q34):

NEW QUESTION # 29
The minimal total cost is always achieved when there is only one warehouse. Is this statement true?

• A. No, more warehouses will reduce the cost of storage
• B. Yes, because the operation cost for warehouse reaches minimal level
• C. No, fewer warehouse may lead to increasing transport costs
• D. Yes, because warehouse overheads are fully utilised

Answer: C Explanation:
The total cost of storage consists of two different costs:
- The cost of warehouses: each one has a different cost, and each has the cost of stock-holding and stock management included
- The transport costs: the total transport cost reduces as further warehouses mean shorter final delivery to the customers.
Depending on each situation, the optimal number of warehouses varies. Generally, more facilities will increase the cost of warehouses while reduce the transport costs and vice versa.
Reference:
LO 1, AC 1.1
NEW QUESTION # 30
When using ABC analysis to classify inventory, which factors must be considered?
1. Demand uncertainty of each item
2. Cumulative percentage of items
3. Cumulative percentage usage value of items
4. Overall inventory turnover

• A. 2 and 4 only
• B. 1 and 3 only
• C. 2 and 3 only
• D. 1 and 4 only

Answer: C Explanation:
ABC analysis is applied to stock and its management. It is based loosely on the Pareto principles, better known as 80/20 rule. Pareto principle is the theory that 80% of outcome results from 20% of inputs. For example, 80% of sales are to the top 20% of customers; 80% of spend on inventory is accounted for by the top 20% of stock items.
The ABC concept is based on Pareto's law. The following steps are carried out for the ABC analy-sis.
- Step 1: Compute the annual usage value for every item in the sample by multiplying the annual requirements by the cost per unit.
- Step 2: Arrange the items in descending order of the usage value calculated above.
- Step 3: Make a cumulative total of the number of items and the usage value.
- Step 4: Convert the cumulative total of the number of items and usage values into a percentage of their grand totals.
- Step 5: Draw a graph connecting cumulative % items and cumulative % usage value. The graph is divided approximately into three segments, where the curve sharply changes its shape. This indicates the three segments A, B and C.
LO 2, AC 2.1
NEW QUESTION # 31
ASI Ltd is known for its commitment to sustainability. ASI builds railroad ties and pilings using recycled plastic bottles and industrial waste instead of standard materials such as wood, steel, and cement. This practice helps the company save 15% in compare with traditional material purchases. Which pillar of sustainability would include the practice of ASI Ltd?

• A. People and Planet
• B. Planet and Profit
• C. Profit and People
• D. Profit and Expense

Answer: B Explanation:
The triple bottom line is a sustainability framework that examines a company's social, environment, and economic impact (or People, Planet, Profit). ASI Ltd practice would reduce the waste into the environment as well as keep the business more profitable. So the correct answer should be Planet and Profit.
Reference:
- 25 Years Ago I Coined the Phrase "Triple Bottom Line." Here's Why It's Time to Rethink It.
- CIPS study guide page 202
LO 3, AC 3.3
NEW QUESTION # 32
Which of the following lists all components, ingredients, and materials required to produce the final product?

• A. Engineering change notice
• B. Master schedule
• C. Purchase order
• D. Bill of materials

Answer: D Explanation:
Master production schedule (MPS) plans items that have "direct" demand, or "independent de-mand." With independent demand, the demand comes from sales orders, service orders, or fore-casts, and the demand comes directly from customer-or forecasted-requirements. It is the list that provides the timing of the production schedule and shows how much each machine can produce, how many shifts are used, etc.
A bill of materials (BOM) is a comprehensive inventory of the raw materials, assemblies, subas-semblies, parts and components, as well as the quantities of each, needed to manufacture a product.
Reference:
LO 2, AC 2.3
NEW QUESTION # 33
Manufacturing resources planning (MRP II) was developed from material requirement planning (MRP). Which of the following is the additional input that is available in MRP II but does not ap-pear in MRP?

• A. Master production schedule
• B. Inventory records
• C. Bill of materials
• D. Finance

Answer: D Explanation:
MRP I was some of the first business software to be widely adopted during the 1970s. Manufacturers sought these systems in order to improve efficiency and accuracy when it came to basic processes such as production scheduling and inventory management.
By the 1980s, manufacturers realized they needed software that could also tie into their accounting systems and forecast inventory requirements. Enter MRP II, which included these integrations in addition to all the capabilities offered by MRP I. Enterprise resource planning (ERP) software features-which we'll cover later on-are included in the following table for comparison.

Reference:
- MRP vs. MRP II: What's the Difference?
- CIPS study guide page 118-119
LO 2, AC 2.3
NEW QUESTION # 34
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