CPIM Practice Exam

Which statement accurately describes on-hand balance?

1. It includes future production estimates

2. It indicates the current physical stock available

3. It is calculated based on past sales records

4. It reflects only theoretical inventory levels

The correct answer is: It indicates the current physical stock available

The on-hand balance is a critical metric in inventory management that indicates the current physical stock available for sale or use in a business. This figure provides a snapshot of what is actually present in inventory at any given moment, allowing businesses to make informed decisions regarding replenishment, order fulfillment, and production planning. The on-hand balance is essential for effective supply chain operations, as it helps companies to assess their capacity to meet customer demand without overstocking or running into stockouts. It is determined by considering the actual quantities of inventory that are physically in stock, minus any adjustments for items that may be on hold, reserved for specific orders, or otherwise unavailable for use. Other options don't accurately capture the essence of on-hand balance. For instance, including future production estimates or relying solely on theoretical inventory levels does not reflect the real-time availability of stock, and while past sales records can inform inventory decisions, they do not directly define the physical quantity presently on hand.