Certified in Logistics, Transportation and Distribution (CLTD) Practice Test 2025 – Your All-in-One Resource to Complete Exam Success!

Days Inventory Outstanding (DIO) is a key metric used to assess how long a company holds inventory before it is sold or used. The correct method for calculating DIO is based on the average daily usage of inventory. This approach leverages the amount of inventory on hand divided by the average daily use rate. By calculating this, you can determine the number of days it will take to turn the inventory into sales under normal operating conditions.

This metric is crucial for evaluating inventory efficiency and can provide insights into operational performance. A lower DIO indicates that a company is selling or using its inventory quickly, which is generally favorable, while a higher DIO can suggest overstocking or sluggish sales.

The other methods listed do not provide a direct calculation for DIO. For instance, annualized COGS calculations relate more to assessing profitability than measuring inventory turnover in terms of days. Similarly, the calculations involving scheduled receipts and gross requirements focus on supply chain planning rather than days of inventory. Lastly, comparing actual output to standard output pertains to productivity metrics rather than inventory metrics. Therefore, the first option is the most direct and applicable method for calculating Days Inventory Outstanding.