CIPS Exam L4M7 Topic 10 Question 9 Discussion

Actual exam question for CIPS's L4M7 exam

Question #: 9
Topic #: 10

[All L4M7 Questions]

The minimal total cost is always achieved when there is only one warehouse. Is this statement true?

ANo, fewer warehouse may lead to increasing transport costs

BYes, because the operation cost for warehouse reaches minimal level

CYes, because warehouse overheads are fully utilised

DNo, more warehouses will reduce the cost of storage

Show Suggested Answer

Suggested Answer: A

The total cost of storage consists of two different costs:

- The cost of warehouses: each one has a different cost, and each has the cost of stock-holding and stock management included

- The transport costs: the total transport cost reduces as further warehouses mean shorter final delivery to the customers.

Depending on each situation, the optimal number of warehouses varies. Generally, more facilities will increase the cost of warehouses while reduce the transport costs and vice versa.

LO 1, AC 1.1

by Ettie at Dec 06, 2022, 05:26 AM

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