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Question 1

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Work Center 1 has an available capacity of 1,200 hours per month. Which of the following amounts represents the cumulative difference between the required capacity and the available capacity of Mont

Question 2

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A customer requests an order of 100 units in Period 1. The master schedule for the item indicates an available-to-promise (ATP) of 85 units for Period 1. Which of the following approaches is the mo

Question 3

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Which of the following factors typically would distort a sales forecast that is based solely on shipment history?

Question 4

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A vendor-managed inventory (\VMI) program provides a benefit to the buying company in which of the following ways?

Question 5

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What is the purpose of a buffer in the theory of constraints (TOC)?

Question 6

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Which of the following tools is used for monitoring a capacity plan?

Question 7

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The primary consideration in maintenance, repair, and operating (MRO) supply systems typically is:

Question 8

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A factory work center has the following work orders. What is the load on this work center?

Question 9

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The horizon for forecasts that are input to the sales and operations planning (S&O0P) process should be long enough that:

Question 10

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Rivalry among competing sellers is generally weaker when:

Question 141 - CPIM-Part-2 discussion

Given the information below, reducing which measure by 10% would contribute most to shortening the cash-to-cash cycle time?

Accounts receivable

Inventory value

Accounts payable

Cost of capital

Suggested answer: A

Explanation:

The cash-to-cash cycle time is a financial metric that measures the time it takes for a company to convert its cash outflows into cash inflows. The cash-to-cash cycle time is calculated by adding the days of inventory outstanding (DIO), the days of sales outstanding (DSO), and the days of payables outstanding (DPO), and then subtracting the days of payables deferred (DPD). The cash-to-cash cycle time can be shortened by reducing any of the components, except for DPD, which should be increased. Reducing which measure by 10% would contribute most to shortening the cash-to-cash cycle time depends on the relative values of each component. However, given the information below, reducing accounts receivable by 10% would have the greatest impact.

The current cash-to-cash cycle time is:

Cash-to-cash cycle time = DIO + DSO + DPO - DPD = 60 + 90 + 30 - 15 = 165 days

If accounts receivable is reduced by 10%, then DSO becomes 81 days (90 x 0.9). The new cash-to-cash cycle time is:

Cash-to-cash cycle time = DIO + DSO + DPO - DPD = 60 + 81 + 30 - 15 = 156 days

The difference is 9 days, which is the largest reduction among all the measures.

If inventory value is reduced by 10%, then DIO becomes 54 days (60 x 0.9). The new cash-to-cash cycle time is:

Cash-to-cash cycle time = DIO + DSO + DPO - DPD = 54 + 90 + 30 - 15 = 159 days

The difference is 6 days, which is smaller than reducing accounts receivable.

If accounts payable is reduced by 10%, then DPO becomes 27 days (30 x 0.9). The new cash-to-cash cycle time is:

Cash-to-cash cycle time = DIO + DSO + DPO - DPD = 60 + 90 + 27 - 15 = 162 days

The difference is 3 days, which is smaller than reducing accounts receivable and inventory value.

If cost of capital is reduced by 10%, then it has no direct effect on the cash-to-cash cycle time, as it is not a component of the formula. However, it may affect the profitability and liquidity of the company indirectly.

Therefore, reducing accounts receivable by 10% would contribute most to shortening the cash-to-cash cycle time, given the information below.

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asked 16/09/2024

Natcha Koopipat

42 questions

Your answer: A B C D

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