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CIPS Whole Life Asset Management Sample Questions (Q106-Q111):

NEW QUESTION # 106
To make loading/unloading more effective and efficient, which feature should be included in vehi-cle dock design?

• A. 'Dual-use' docks are always the most efficient
• B. Steeper slope will reduce the chance of errors and accidents
• C. Vehicle docks only require a small area to ensure faster goods flow
• D. The dock platform is almost at the same level as the height of the trailer's rear platform

Answer: D Explanation:
Warehouse dock is a feature of warehouse design - used for unloading and loading vehicles. It is crucial to carefully design where they are externally located in a facility and choose the best type of dock depending on the available space.
In many cases efficient and effective loading and unloading is achieved by a dock design that places the loading and unloading vehicle' rear platform at the same height as the warehouse floor.
Slopes in docking areas must always be as small as possible: the gentler the slope, the less chance of errors and accidents. If a warehouse is going to be used by large volume vehicles, such as high cubes, it may be necessary to install special devices, such as hydraulically adjustable docks or ground level lift platforms.
Current trends indicate that vehicles that are longer and wider and have a greater volume will be increasingly common. Therefore, when planning the location of the docks, it would be useful to ensure that there is a large area for the approach, manoeuvring and build-up of large vehicles.
One option to increase the efficiency of the docks is to combine reception and dispatch into a single area (dual use). This solution drastically reduces costs and, above all, increases the use of handling equipment and personnel. However, if this is justified by the volume of material flows, there can also be separate access points for each function (some for reception and others for dispatch - 'sole use').
Reference:
- Warehouse docking areas - Interlake
- CIPS study guide page 13
LO 1, AC 1.1
NEW QUESTION # 107
Company XYZ is a candy manufacturer. Company XYZ makes a batch of 1,000 Christmas candy canes that are no longer edible after December 31. Company XYZ is able to sell 750 canes of the batch, but the other 250 are sitting in the warehouse. December 31 comes, and these candy canes is no longer sell-able. The batch of 250 candy canes belongs to which type of inventory?

• A. Redundant inventory
• B. Buffer stock
• C. Stockout
• D. Obsolete inventory

Answer: D 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 can be 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.
Reference:
LO 2, AC 2.1
NEW QUESTION # 108
One of the important outputs of an MRP system is the material requirement plan. This plan shows the net requirements for materials or components to make the final product. Which of the following best describes the net material requirements?

• A. On order + Inventory on-hand
• B. Total requirements - order releases + amount on-hand
• C. Gross requirements + on-order - Inventory on-hand
• D. Gross requirements - Inventory level - Scheduled receipt

Answer: D Explanation:
The net requirements are worked out using the following equation:
Net requirements = Total requirements - Available inventory
Where:
Total requirements = Gross requirements
Available inventory = Inventory on-hand + Units on-order
In the other words: Net requirements = Gross requirements - Inventory on-hand - Units on-order Inventory on-hand is also known as Inventory level, whereas Units on-order can be called Scheduled receipt.
Reference:
LO 2, AC 2.3
NEW QUESTION # 109
XYZ Ltd is a highly profitable leading industrial distributor with over 60,000 products and an enviable record for customer service. After undertaking preliminary discussions it was decided to analyse the value-adding activities that contribute to XYZ's flagship products. The company is conducting which of the following activities?

• A. Silo-working
• B. Postponement
• C. Kanban
• D. Value stream mapping

Answer: D Explanation:
According to Hines and Rich, value stream refers to specific parts of the firms that actually add value to the specific product or service under consideration. XYZ Ltd is mapping the value stream by analysing the value-adding activities that contribute to their most important product.
Postponement is a business strategy which maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment. An example of this strategy is Dell Computers' build-to-order online store. One of the earliest references to the concept was in a paper by Zinn and Bowersox in the Journal of Business Logistics. They highlighted five types: Labelling, Packaging, Assembly, Manufacturing and Time postponements.
Kanban (signboard or billboard in Japanese) is a scheduling system for lean manufacturing and just-in-time manufacturing (JIT). Taiichi Ohno, an industrial engineer at Toyota, developed kanban to improve manufacturing efficiency. Kanban is one method to achieve JIT. The system takes its name from the cards that track production within a factory. For many in the automotive sector, kanban is known as the "Toyota nameplate system".
Put simply, silo working occurs when several departments or groups within that organisation do not want to share information or knowledge with other individuals they work with.
Reference:
LO 2, AC 2.3
NEW QUESTION # 110
When accounting for the disposal of fixed assets, the gain or loss on disposal is equal to...?

• A. The difference between resale price and the cost or valuation plus depreciation up to the beginning of the year in which disposal took place
• B. The difference between resale price and the cost of that asset
• C. The difference between resale price and the cost of the asset less depreciation up to the beginning of the year in which disposal took place
• D. The difference between resale price and the cost or valuation less accumulated depre-ciation up to the date of disposal

Answer: C Explanation:
Fixed assets may be sold anytime during their useful life. This gives rise to the need to derecognize the asset from balance sheet and recognize any resulting gain or loss in the income statement.
The accounting for disposal of fixed assets can be summarized as follows:
- Record cash receive or the receivable created from the sale:
Debit Cash/Receivable
- Remove the asset from the balance sheet
Credit Fixed Asset (Net Book Value)
- Recognize the resulting gain or loss
Debit/Credit Gain or Loss (Income Statement)
Example
ABC LTD purchased a machine for $2000 on 1st January 2001 which had a useful life of 5 years and an estimated residual value of $500. The machine was being depreciated on straight line basis. However, ABC LTD decided to sell the asset on1 January 2003 for $1500 in order to raise cash for the purchase of a new machine.
The disposal of the fixed asset will be recorded as follows:
Record cash received or the receivable arising from the sale:
Debit Cash $1,500
Remove the asset from the balance sheet
As a fixed asset is recognized in the balance sheet at the Net Book Value (i.e. Cost less Accumulated Depreciation), the machine will be removed from the accounts of ABC LTD in two parts:
First, the Machine Cost must be removed by crediting the ledger:
Credit Machine Cost $2,500
Second, the Accumulated Depreciation in respect of the machine must be removed by debiting the ledger:
Debit Accumalated Depreciation $600
Accumulated Depreciation: (2000 - 500)/5 x 2 Years
The combined effect of the above two transactions would be to remove the machine's net book value of $1400 (2000 - 600) from the balance sheet.
Recognize the resulting gain or loss on the sale of machine
ABC LTD received $1500 for an asset with a balance sheet worth of $1400. It therefore earned a gain of $100. The gain will be recorded as follows:
Credit Gain on Disposal $100
Reference:
- Accounting for Disposals
- CIPS study guide page 197-198
LO 3, AC 3.3
NEW QUESTION # 111
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