CPIM Practice Exam

What is finished goods inventory?

1. Inventory that is still being processed

2. Items not approved for shipping

3. Products that are ready for shipment to customers

4. Raw materials awaiting processing

The correct answer is: Products that are ready for shipment to customers

Finished goods inventory refers specifically to products that have completed all manufacturing processes and are now ready for shipment to customers. This inventory category is crucial for businesses, as it directly impacts their ability to meet customer demand and achieve sales objectives. Maintaining an appropriate level of finished goods inventory ensures that a company can deliver products promptly, enhancing customer satisfaction and potentially increasing revenue. In contrast, the other options describe different types of inventory. Inventory still being processed refers to work-in-progress (WIP) inventory, which includes items that are not yet completed. Items not approved for shipping are typically those that may require additional quality checks or validation before they can be sold, and thus are not considered “finished goods.” Lastly, raw materials awaiting processing are the basic inputs for production that have not yet been transformed into finished products. These categories serve different purposes in the inventory management system, highlighting the importance of distinguishing between them for effective supply chain operations.