CPIM Practice Exam

What type of inventory record system uses transactions as they occur to track inventory levels?

1. Perpetual inventory system

2. Periodic inventory system

3. Two-bin inventory system

4. Cycle counting inventory system

The correct answer is: Perpetual inventory system

The perpetual inventory system is designed to maintain real-time inventory records by updating inventory levels continuously as transactions occur. This means that every incoming and outgoing inventory transaction is recorded immediately, providing an up-to-date reflection of inventory on hand. This method offers several advantages, such as enhanced accuracy in inventory tracking and the ability to make informed purchasing and production decisions based on current stock levels. As it captures each movement of inventory, businesses can readily identify stock levels, reducing the risk of stockouts and allowing for efficient inventory management. In contrast, other systems like the periodic inventory system do not provide real-time updates; instead, they update inventory records at specific intervals, leading to potential discrepancies between the recorded and actual inventory levels. Similarly, the two-bin system is a visual method used for inventory management that relies on physical bins to signal when to reorder, and cycle counting focuses on inventory accuracy through regular checks rather than real-time tracking. Each has its uses, but they do not operate on the same continuous basis as the perpetual inventory system.