CPIM Practice Exam 2025 – The All-In-One Guide to Achieving Exam Success!

The correct method for calculating days of supply is to divide the inventory on hand by the average daily usage. This calculation helps determine how many days the current inventory will last given the current rate of consumption.

By taking inventory on hand, you're assessing the actual stock available, and by dividing by average daily usage, you're establishing an understanding of how quickly that stock is used in a typical day. This quantifies the supply situation and aids in inventory management decisions, ensuring that you can maintain adequate stock levels without overstocking.

In contrast, other methods listed do not accurately represent how long inventory will last. For instance, multiplying inventory on hand by average daily usage would yield a figure not relevant to supply duration. Similarly, using average daily sales or dividing daily usage by inventory on hand would not provide meaningful insight into how many days the existing supply can cover. Understanding this correct approach is critical for effective supply chain and inventory management.