Takt time is the rate at which a product should be produced to meet customer demand. It is calculated by dividing the available production time by the customer demand. In this case, the available production time is 10 hours per day, and the customer demand is 2,400 units per day. Converting 10 hours to minutes gives us 600 minutes of production time per day. So, takt time = 600 minutes / 2400 units = 0.25 minutes per unit. However, this is not one of the answer choices, so we need to look for more information or context.

According to the CPIM Part 1 Study Guide, takt time is usually rounded up to the nearest whole number to allow for some buffer time and to simplify the calculation. Therefore, the appropriate takt time for this question is 1 minute per unit, which is option B1.

References := 1 CPIM Part 1 Study Guide, page 77

Reducing DSO (days sales outstanding) allows a company to collect payments from customers faster, shortening the time it takes to convert inventory investments into cash. This improves the cash conversion cycle, which is a key financial metric used to evaluate liquidity and operational efficiency.

“Reducing days sales outstanding (DSO) reduces the cash-to-cash cycle time and improves liquidity.”

— CPIM SMR Study Notes; Financial Metrics Section

The mean absolute deviation (MAD) is a measure of variability that indicates the average distance between observations and their mean. MAD uses the original units of the data, which simplifies interpretation. Larger values signify that the data points spread out further from the average. Conversely, lower values correspond to data points bunching closer to it. The mean absolute deviation is also known as the mean deviation and average absolute deviation1.

The formula for the mean absolute deviation is the following:

MAD = (Σ|X – X̄|) / N

Where:

•X = the value of a data point

•X̄ = the mean of the data points

•|X – X̄| = the absolute deviation of a data point from the mean

•N = the number of data points

•Σ = the summation symbol

Based on the table, we can calculate the MAD as follows:

•X̄ = (80 + 50 + 50 + 75) / 4 = 63.75

•|X – X̄| = |80 - 63.75|, |50 - 63.75|, |50 - 63.75|, |75 - 63.75| = 16.25, 13.75, 13.75, 11.25

•MAD = (16.25 + 13.75 + 13.75 + 11.25) / 4 = 6.25

Therefore, the correct answer is B.

References := 1 CPIM Part 2 Exam Content Manual, Domain 3: Plan and Manage Demand, Task 3.1: Develop, validate, and review demand plans, p. 23.

Fixed order quantity is a method that places a replenishment order when the quantity on hand falls below a predetermined level, called the reorder point. The reorder point is calculated based on the expected demand during the lead time and the safety stock. The order quantity is fixed and constant, and it is determined by the economic order quantity (EOQ) formula or other criteria. Fixed order quantity is also known as the order point/order quantity (OP/OQ) system or the continuous review system.

Option A is not correct, because min-max system is a method that places a replenishment order when the quantity on hand falls below a minimum level, called the order point. The order quantity is variable and depends on the difference between the maximum level and the current inventory level. Min-max system is also known as the two-bin system or the bin system.

Option C is not correct, because periodic review is a method that places a replenishment order at fixed intervals of time, regardless of the quantity on hand. The order quantity is variable and depends on the difference between the target inventory level and the current inventory level. Periodic review is also known as the fixed order interval (FOI) system or the periodic order quantity (POQ) system.

Option D is not correct, because available-to-promise (ATP) is not a method of inventory replenishment, but a calculation of the uncommitted portion of the current inventory and planned production. ATP is used to promise delivery dates to customers based on the availability of inventory and production capacity.

Inventory Management and Control

Inventory Replenishment Methods

Inventory Replenishment Policies

 Periodic review is a system that determines the order quantity and reorder point for an item based on the inventory position at fixed intervals. This system is suitable for inventory management of low value items, as it reduces the ordering and holding costs, simplifies the ordering process, and allows for grouping orders. Therefore, option C is correct. Option A is incorrect because order point is a system that triggers an order when the inventory level falls below a predetermined level. This system requires continuous monitoring of inventory levels, which may not be cost-efficient for low value items. Option B is incorrect because material requirements planning (MRP) is a system that calculates the requirements for components and materials based on the demand for end items. This system is more appropriate for items with dependent demand, rather than independent demand. Option D is incorrect because economic order quantity (EOQ) is a system that determines the optimal order quantity that minimizes the total ordering and holding costs. This system assumes constant and known demand and lead time, which may not be realistic for some items. References: CPIM Part 2 Exam Content Manual, Version 8.0, Section E: Plan and Manage Inventory, Subsection E.2: Inventory Management Methods, p. 53.