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Quizzes > Business & Finance

Inventory Management Quiz: Test Your Skills in 15 Questions

Quick, free inventory test with instant results and guidance on what to review.

Editorial: Review CompletedCreated By: Alex GeorgakopoulosUpdated Aug 27, 2025
Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art displaying questions for an Inventory Management Aptitude Test quiz.

Use this inventory management quiz to check your grasp of forecasting, reorder points, and stock control across 15 quick questions. For wider context, try the supply chain inventory quiz, or build hands-on practice with the supply management practice test before you review your results and next steps.

If cost of goods sold is $200,000 and average inventory is $50,000, what is the inventory turnover ratio?
2
4
8
1
Inventory turnover ratio is calculated as cost of goods sold divided by average inventory. Dividing $200,000 by $50,000 gives 4.
Which of the following formulas correctly represents the Economic Order Quantity (EOQ)?
EOQ = (2 Ã- D + S) / H
EOQ = sqrt((2 Ã- D Ã- S) / H)
EOQ = sqrt(D / (2 Ã- S Ã- H))
EOQ = 2 Ã- D Ã- S Ã- H
The standard EOQ formula is the square root of (2 Ã- annual demand Ã- ordering cost) divided by holding cost. This balances ordering and holding costs.
If daily demand is 20 units and lead time is 5 days with no safety stock, what is the reorder point?
5 units
25 units
20 units
100 units
Reorder point is daily demand multiplied by lead time. Twenty units per day times five days equals 100 units.
In an ABC classification, which description best fits Class A items?
Approximately 10 - 20% of items accounting for about 70 - 80% of total consumption value
Items with the lowest annual usage value
About 50% of items accounting for 5 - 10% of value
Roughly 30% of items accounting for 15 - 25% of value
Class A items represent a small percentage of SKUs but a large share of consumption value, typically around 70 - 80%.
What is the primary purpose of holding safety stock?
To buffer against variability in demand and lead time
To meet a vendor's minimum order requirement
To eliminate the need for reorder points
To reduce ordering costs
Safety stock is extra inventory held to protect against fluctuations in demand and lead time variability. It reduces the risk of stockouts.
What does a high inventory turnover ratio generally indicate about a company's inventory management?
Poor supplier reliability
Excessive stock on hand
Efficient use of working capital and rapid stock movement
High product obsolescence risk
A high turnover ratio means inventory is sold and replaced quickly, indicating efficient management of stock and working capital.
Calculate the EOQ given annual demand (D) of 10,000 units, ordering cost (S) of $50 per order, and holding cost (H) of $5 per unit per year.
1,000 units
316 units
447 units
2,000 units
EOQ = sqrt(2 Ã- 10,000 Ã- 50 / 5) = sqrt(1,000,000 / 5) = sqrt(200,000) ≈ 447 units.
If daily demand is 100 units, lead time is 4 days, and safety stock is 50 units, what is the reorder point?
350 units
400 units
450 units
500 units
Reorder point = (daily demand Ã- lead time) + safety stock = (100 Ã- 4) + 50 = 450 units.
Which ABC class usually represents about 15% of items but accounts for around 70 - 80% of total consumption value?
Class A
Class B
Class D
Class C
Class A items are a small portion of SKUs (about 10 - 20%) but represent the majority of consumption value (70 - 80%).
A product's daily demand standard deviation is 20 units and lead time is 10 days. For a 95% service level (Z = 1.65), what is the safety stock?
104 units
200 units
330 units
165 units
Safety stock = Z Ã- σ Ã- √lead time = 1.65 Ã- 20 Ã- √10 ≈ 1.65 Ã- 20 Ã- 3.162 = 104 units.
If daily demand is 50 units, how many fewer units must be ordered when lead time decreases from 10 days to 5 days, ignoring safety stock?
50 units
250 units
200 units
150 units
Reorder point drop = daily demand Ã- change in lead time = 50 Ã- (10 - 5) = 250 units.
Beginning inventory is $40,000, ending inventory is $60,000, and COGS is $300,000. What is the inventory turnover ratio?
6
5
4
7
Average inventory = (40,000 + 60,000) / 2 = 50,000. Turnover = 300,000 / 50,000 = 6.
What is a common consequence of maintaining very high levels of safety stock?
Reduced carrying costs
Increased holding costs
Lower reorder points
More frequent stockouts
High safety stock increases the average inventory on hand, which raises storage, insurance, and opportunity costs.
Which metric is primarily used to categorize items in an ABC analysis?
Order frequency
Lead time length
Number of suppliers
Annual consumption value
ABC classification ranks items by their annual consumption value (unit cost Ã- annual usage).
If lead time variability increases while holding the same service level, what happens to safety stock?
Safety stock remains the same
Safety stock increases
Safety stock decreases
No change to reorder point
Greater lead time variability raises the standard deviation of demand during lead time, requiring more safety stock for the same service level.
In a periodic review system with a review interval of 7 days, lead time of 3 days, average daily demand of 50 units, and safety stock of 105 units, what is the order-up-to level?
500 units
550 units
600 units
605 units
Order-up-to level = demand Ã- (review interval + lead time) + safety stock = 50 Ã- (7+3) + 105 = 605 units.
A company has 1,000 SKUs and uses typical ABC thresholds. If Class A represents approximately 20% of SKUs, how many items are in Class A?
200 SKUs
800 SKUs
400 SKUs
100 SKUs
Twenty percent of 1,000 SKUs equals 200 SKUs classified as Class A.
For a product with average lead time demand of 1,000 units and a coefficient of variation of 0.25, what safety stock is needed for a 90% service level (Z=1.28)?
250 units
128 units
1,280 units
320 units
Safety stock = Z Ã- CV Ã- mean lead time demand = 1.28 Ã- 0.25 Ã- 1,000 = 320 units.
Which strategy would most directly increase a company's inventory turnover ratio?
Increasing safety stock
Reducing average inventory levels
Extending supplier lead times
Ordering larger quantities each cycle
Inventory turnover = COGS / average inventory. Reducing average inventory raises turnover if COGS remains constant.
To achieve a 99% service level (Z=2.33) with lead time demand standard deviation of 30 units, what safety stock should be held?
200 units
46.6 units
30 units
70 units
Safety stock = Z Ã- σ = 2.33 Ã- 30 ≈ 70 units for a 99% service level.
0
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Learning Outcomes

  1. Analyse inventory turnover ratios to gauge stock efficiency.
  2. Apply Economic Order Quantity formulas for cost optimisation.
  3. Evaluate reorder point calculations for timely replenishment.
  4. Identify ABC classification segments to prioritise stock items.
  5. Demonstrate understanding of safety stock principles in risk management.
  6. Interpret lead time data to streamline procurement schedules.

Cheat Sheet

  1. Inventory Turnover Ratio - This key metric shows how fast a company sells and replaces its inventory within a set period. A higher turnover means you're moving products efficiently and avoiding excess stock piling up.
  2. Economic Order Quantity (EOQ) - EOQ calculates the ideal order size that minimizes total inventory costs by balancing ordering expenses and holding fees. Mastering this formula helps you place smarter orders and free up cash flow.
  3. Reorder Point - The reorder point tells you exactly when to place a new order to prevent stockouts, factoring in lead time and average demand. Getting this right keeps shelves stocked without overordering.
  4. ABC Classification - This method sorts inventory into A, B, and C categories, so you can focus your efforts on the most valuable items. By prioritizing A-items, you ensure high-impact products get top attention.
  5. Safety Stock Principles - Safety stock is your buffer against unpredictable demand spikes and supplier delays. Keeping the right cushion means fewer emergency orders and happier customers.
  6. Lead Time Analysis - Lead time measures how long it takes from ordering to receiving goods. Understanding this helps you plan accurately and avoid unplanned gaps in your inventory.
  7. Holding Costs - These are the expenses you incur storing unsold goods - think warehousing, insurance, and depreciation. Monitoring holding costs keeps your storage budget under control.
  8. Ordering Costs - Every purchase order has costs: paperwork, shipping, and supplier fees. Keeping ordering costs in check helps you find the sweet spot between frequent and bulk orders.
  9. Stockout Implications - Running out of stock can mean missed sales, upset customers, and damaged reputation. Effective inventory systems guard against these pitfalls and keep business flowing.
  10. Just-In-Time (JIT) Inventory - JIT aligns orders with production schedules to slash holding costs and reduce waste. When done right, it keeps inventory lean and your operation nimble.
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