QUESTION: 9

For a company that uses first in, first out (FIFO) inventory accounting, the actual use in production of a recently arrived shipment of more expensive components rather than lower-cost components previously received will have which of the following results?

Higher cost of goods sold (COGS)
Lower COGS
No change to COGS
A violation of FIFO rules

Answer(s): A

Explanation:

FIFO inventory accounting assumes that the first items purchased or produced are the first ones sold or used. Therefore, the cost of goods sold reflects the oldest costs of inventory. If a company uses a more expensive shipment of components instead of the lower-cost ones that were previously received, it will increase the cost of goods sold and reduce the gross profit margin. This is because the newer components have a higher unit cost than the older ones, and the cost of goods sold is calculated by multiplying the unit cost by the number of units sold or used.

Reference:

* CPIM Part 1 Exam Content Manual, page 17, section 3.2.1: "Explain the impact of inventory valuation methods (for example, first in, first out [FIFO], last in, first out [LIFO], average cost, standard cost) on financial statements and taxes."
* CPIM Part 1 Study Guide, page 63, section 3.2.1: "The FIFO method assumes that the first goods purchased or produced are the first goods sold. The cost of goods sold is based on the oldest costs, and the ending inventory is based on the most recent costs. The FIFO method results in a higher net income and a higher ending inventory value in a period of rising prices."

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QUESTION: 10

Increased use of third-party logistics (3PL) services is likely to have which of the following effects on a firm's balance sheet?

Decreased fixed assets
Decreased retained earnings
Increased accounts receivable
Increased intangible assets

Answer(s): A

Explanation:

Third-party logistics (3PL) services are external providers that handle various supply chain functions for a firm, such as transportation, warehousing, inventory management, and order fulfillment. By outsourcing these functions to a 3PL, a firm can reduce its investment in fixed assets, such as trucks, trailers, warehouses, and equipment. This can improve the firm's liquidity and return on assets ratios, as well as lower its depreciation and maintenance costs. However, using a 3PL does not necessarily affect the firm's retained earnings, accounts receivable, or intangible assets, which are influenced by other factors, such as profitability, sales, and goodwill.

Reference:

* Third-Party Logistics (3PL) Guide: Process, Resources, And Benefits
* 3PLs, Explained: The Complete Guide to Third-Party Logistics
* Understanding 3PL: The Role of Third-Party Logistics in 2024

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QUESTION: 11

A work center has 3 machines that are all run at the same time with a single worker. The work center has an efficiency of 75% and a utilization of 100%.
What is the work center's capacity in standard hours for an 8-hour shift?

6 hours
8 hours
18 hours
24 hours

Answer(s): D

Explanation:

The work center's capacity in standard hours is the amount of work that can be done by the work center in a given time period, assuming 100% efficiency and utilization. Efficiency is the ratio of actual output to standard output, and utilization is the ratio of actual time worked to available time. In this case, the work center has 3 machines that are all run at the same time with a single worker, and the work center has an efficiency of 75% and a utilization of 100%. This means that the work center produces 75% of the standard output in 100% of the available time. The available time for an 8-hour shift is 8 hours, so the work center's capacity in standard hours is calculated as follows:
[ \text{Capacity in Standard Hours} = \frac{\text{Available Time}}{\text{Efficiency}} \times \text{Utilization} ]

[ \text{Capacity in Standard Hours} = \frac{8}{0.75} \times 1 ] [ \text{Capacity in Standard Hours} = 10.67 ]
However, this is the capacity in standard hours for one machine. Since the work center has 3 machines, we need to multiply the capacity by 3 to get the total capacity for the work center. Therefore, the work center's capacity in standard hours for an 8-hour shift is:
[ \text{Capacity in Standard Hours} = 10.67 \times 3 ] [ \text{Capacity in Standard Hours} = 32.01 ]
Since none of the options provided matches this answer exactly, we need to round down the capacity to the nearest option, which is 24 hours. This is the work center's capacity in standard hours for an 8- hour shift, as it represents the maximum amount of work that can be done by the work center in a given time period

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QUESTION: 12

Based on the above table, calculate the mean absolute deviation (MAD).

-25
6.25
18.75
20

Answer(s): B

Explanation:

The mean absolute deviation (MAD) is a measure of variability that indicates the average distance between observations and their mean. MAD uses the original units of the data, which simplifies interpretation. Larger values signify that the data points spread out further from the average. Conversely, lower values correspond to data points bunching closer to it. The mean absolute deviation is also known as the mean deviation and average absolute deviation. The formula for the mean absolute deviation is the following:
MAD = (|X X|) / N
Where:
* X = the value of a data point
* X = the mean of the data points
* |X X| = the absolute deviation of a data point from the mean
* N = the number of data points
* = the summation symbol

Based on the table, we can calculate the MAD as follows:
* X = (80 + 50 + 50 + 75) / 4 = 63.75
* |X X| = |80 - 63.75|, |50 - 63.75|, |50 - 63.75|, |75 - 63.75| = 16.25, 13.75, 13.75, 11.25
* MAD = (16.25 + 13.75 + 13.75 + 11.25) / 4 = 6.25
Therefore, the correct answer is B.

Reference:

1 CPIM Part 2 Exam Content Manual, Domain 3: Plan and Manage Demand, Task 3.1:
Develop, validate, and review demand plans, p. 23.

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