CPIM Practice Exam

A business conducts physical inventory counting to:

1. Estimate potential sales for the coming quarter

2. Determine the accuracy of its inventory records

3. Evaluate supplier performance

4. Establish a new marketing strategy

The correct answer is: Determine the accuracy of its inventory records

The rationale behind conducting physical inventory counting primarily revolves around its role in determining the accuracy of inventory records. Companies maintain inventory records to keep track of stock levels, costs, and sales. However, these records can become inaccurate over time due to various reasons, such as administrative errors, theft, or discrepancies in the data entry processes. By performing regular physical counts, businesses can compare the actual quantity of inventory on hand against what their records indicate. This process is crucial for identifying discrepancies, which can help businesses pinpoint areas that require operational improvements or adjustments in inventory management practices. Ensuring accurate inventory records is vital for making informed business decisions regarding stock replenishment, financial reporting, and customer service. While understanding potential sales, evaluating supplier performance, or establishing marketing strategies are important elements of business operations, these do not directly relate to the primary objective of conducting physical inventory counts. The focus is squarely on validating and ensuring the correctness of inventory data to support broader business activities.