Certified Maintenance & Reliability Professional (CMRP) Practice Exam

Which measure indicates the cost of inventory relative to plant value?

1. Percentage of inventory cost to plant value

2. Percentage vendor-managed inventory

3. The total operational costs

4. Service level

The correct answer is: Percentage of inventory cost to plant value

The measure that indicates the cost of inventory relative to plant value is the percentage of inventory cost to plant value. This metric is crucial for understanding how much of the plant's overall value is tied up in inventory. It provides insights into the efficiency of inventory management and helps identify whether the amount of inventory held is justified given the value of the plant's operations. By expressing inventory costs as a percentage of plant value, organizations can evaluate their inventory levels in relation to the scale of their operations. This can guide decisions on purchasing, production planning, and resource allocation, ensuring that capital is not excessively locked in inventory that could be put to better use elsewhere. The other options do not directly measure the relationship between inventory costs and plant value: vendor-managed inventory is related to supply chain management rather than inventory valuation, total operational costs encompass all expenses related to running the plant, and service level measures performance in meeting customer demand rather than assessing inventory relative to plant assets.