Taitt Supply Chain Management (SCM) Exam 1 Practice

Which statement correctly compares cycle counting and annual inventory?

Cycle counting is completed annually; annual inventory is ongoing. Cycle counting updates only at year-end; annual inventory updates in real-time. Cycle counting is a full physical count; annual inventory is random sampling. Cycle counting is ongoing and selective; annual inventory is a full count once per year.

Correct Answer:

Cycle counting is ongoing and selective; annual inventory is a full count once per year.

Explanation:

Cycle counting is an ongoing and selective practice where a subset of inventory items is counted on a rotating schedule, typically focusing on high-value or high-risk items, to maintain accuracy continuously. Annual inventory is a full physical count performed once per year to verify quantities and value for financial reporting. This combination captures the reality that cycle counts run throughout the year and are targeted, while an annual inventory provides a complete snapshot for accounting. The other statements misstate timing and scope: cycle counting is not limited to year-end, and annual inventory is not updated in real-time or done as random sampling.

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