CPIM Practice Exam

What is cycle counting?

1. An annual physical inventory system

2. A counting method applied to select inventory items

3. A method to calculate total inventory value

4. A technique for managing customer orders

The correct answer is: A counting method applied to select inventory items

Cycle counting is a inventory accuracy technique that involves regularly counting a subset of inventory items, rather than conducting a complete inventory count at once. This method allows organizations to verify the accuracy of their inventory records on a more frequent basis. By focusing on select inventory items, cycle counting can be tailored to account for the most valuable or most frequently used items, making it more efficient. This approach provides several benefits, such as minimizing disruption to operations, allowing for immediate corrections to inventory records, and helping to identify and investigate discrepancies in inventory levels. Cycle counting is particularly useful in environments with high transaction volumes, as it supports ongoing accuracy without interrupting business processes. In contrast, an annual physical inventory system involves counting all inventory at once, which can be time-consuming and lead to greater disruptions. Calculating total inventory value is typically a financial function rather than a counting method, and managing customer orders does not directly relate to the inventory counting process.