Test Bank Managerial Accounting: Creating
Value in a Dynamic Business Environment,
13th Edition by Ronald Hilton
Appendix III IA
1) The EOQ model is a mathematical tool for determining the order quantity that:
IA IA IA IA IA IA IA IA IA IA IA IA
A) maximizes the costs of ordering and holding inventory. IA IA IA IA IA IA IA
B) equals the costs of ordering and holding inventory.
IA IA IA IA IA IA IA
C) minimizes the costs of ordering and holding inventory. IA IA IA IA IA IA IA
All Chapters IA
D) has no effect on the costs of ordering and holding inventory.
IA IA IA IA IA IA IA IA IA IA
E) none of these answers are correct.
Answers Included
IA IA IA IA IA
IA
2) Inventory decisions involve a delicate balance between which of the following classes of
IA IA IA IA IA IA IA IA IA IA IA IA I
Acosts?
A) Ordering costs, advertising costs, and shipping costs
IA IA IA IA IA IA
B) Advertising costs, holding costs, and shortage costs IA IA IA IA IA IA
C) Ordering costs, holding costs, and shortage costs
IA IA IA IA IA IA
D) Ordering costs, shipping costs, and shortage costs
IA IA IA IA IA IA
E) Shipping costs, holding costs, and shortage costs
IA IA IA IA IA IA
3) Which one of the following is true of a just-in-time (JIT) system?
IA IA IA IA IA IA IA IA IA IA IA
A) JIT system uses a “pull” approach to controlling manufacturing
IA IA IA IA IA IA IA IA
B) Inventory of raw materials and parts are kept as a buffer
IA IA IA IA IA IA IA IA IA IA
C) Inventory of partially completed parts are kept as a buffer
IA IA IA IA IA IA IA IA IA
D) Finished goods are kept as a buffer IA IA IA IA IA IA
E) None of the answers are correct
IA IA IA IA IA
4) Which one of the following is true of Economic Order Quantity (EOQ)?
IA IA IA IA IA IA IA IA IA IA IA
A) The EOQ approach takes the view that some inventory is necessary in order to
IA IA IA IA IA IA IA IA IA IA IA IA IA I
Aoptimize the order quantity IA IA IA
B) Is calculates as the square root of the following: (2 × annual requirement × cost per
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
order) ÷ annual holding cost per unit
IA IA IA IA IA IA
C) The graphical approach is one method of calculating EOQ
IA IA IA IA IA IA IA IA
D) A mathematical tool for determining the order quantity that minimizes the cost of
IA IA IA IA IA IA IA IA IA IA IA IA I
Aordering and holding inventory IA IA IA
E) All of the answers are correct
IA IA IA IA IA
1
,5) Which of the following is a way that JIT efficiencies are achieved?
IA IA IA IA IA IA IA IA IA IA IA
A) Negotiating long-term supply agreements IA IA IA
B) Eliminating inspections IA
C) Reducing the number of vendors IA IA IA IA
D) Making less frequent payments IA IA IA
E) All of the answers are correct
IA IA IA IA IA
6) Inventory holding costs typically include:
IA IA IA IA
A) clerical costs of purchase-order preparation.
IA IA IA IA
B) costs of deterioration, theft, or spoilage.
IA IA IA IA IA
C) costs associated with lost sales to customers.
IA IA IA IA IA IA
D) forgone interest on money tied up in inventory.
IA IA IA IA IA IA IA
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in
IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
inventory.
A
7) Inventory holding costs would typically include all of the following except:
IA IA IA IA IA IA IA IA IA IA
A) insurance.
B) theft.
C) transportation.
D) obsolescence.
E) warehouse rent. IA
8) Which of the following is classified as an inventory shortage cost?
IA IA IA IA IA IA IA IA IA IA
A) Purchase order preparation IA IA
B) Production disruption IA
C) Lost sales and lost customers
IA IA IA IA
D) Spoilage
E) Both production disruption and lost sales and lost customers
IA IA IA IA IA IA IA IA
9) At the economic order quantity:
IA IA IA IA
A) total annual inventory costs, holding costs, and ordering costs are all minimized.
IA IA IA IA IA IA IA IA IA IA IA
B) total annual inventory costs and holding costs are minimized.
IA IA IA IA IA IA IA IA
C) total annual inventory costs are minimized, and holding costs equal ordering costs.
IA IA IA IA IA IA IA IA IA IA IA
D) total annual inventory costs are minimized, and holding costs exceed ordering costs.
IA IA IA IA IA IA IA IA IA IA IA
E) total annual inventory costs are minimized, and ordering costs exceed holding costs.
IA IA IA IA IA IA IA IA IA IA IA
2
,10) Langdon Enterprises uses an economic order quantity model and has determined an optimal
IA IA IA IA IA IA IA IA IA IA IA IA I
Aorder size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per order,
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
Aand holding costs are $6 per unit. The company's annual holding costs total:
IA IA IA IA IA IA IA IA IA IA IA IA
A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. IA IA IA IA IA
11) Langdon Enterprises uses an economic order quantity model and has determined an optimal
IA IA IA IA IA IA IA IA IA IA IA IA I
Aorder size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
holding costs are $4 per unit. The company's annual holding costs total:
IA IA IA IA IA IA IA IA IA IA IA IA
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. IA IA IA IA IA
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
in 310-
A IA
sheet packages at a cost of $310 per package. Management estimates that the cost of placin
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
g and receiving a typical order is $36, and the annual cost of carrying a package in inventor
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
y is $3.60. Reflection Graphics uses 4,700 packages of paper each year. Production is const
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
ant, and the lead time to receive an order is two week.
IA IA IA IA IA IA IA IA IA IA IA
The economic order quantity is approximately:
IA IA IA IA IA
Note: Round your final answer to the nearest whole number.
IA IA IA IA IA IA IA IA IA
A) 307 packages. IA
B) 4,018 packages. IA
C) 2,093 packages. IA
D) 1,636 packages. IA
E) 1,166 packages. IA
3
, 13) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
in 100-
A IA
sheet packages at a cost of $100 per package. Management estimates that the cost of placin
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
g and receiving a typical order is $15, and the annual cost of carrying a package in inventor
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
y is $1.50. Reflection Graphics uses 2,600 packages of paper each year. Production is const
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
ant, and the lead time to receive an order is one week.
IA IA IA IA IA IA IA IA IA IA IA
The economic order quantity is approximately:
IA IA IA IA IA
A) 203 packages. IA
B) 225 packages. IA
C) 228 packages. IA
D) 565 packages. IA
E) 631 packages. IA
14) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
in 350-
A IA
sheet packages at a cost of $350 per package. Management estimates that the cost of placin
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
g and receiving a typical order is $40, and the annual cost of carrying a package in inventor
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
y is $4.00. Reflection Graphics uses 5,100 packages of paper each year. Production is const
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
ant, and the lead time to receive an order is three weeks.
IA IA IA IA IA IA IA IA IA IA IA
Note: Assume 52 weeks in a year. Do not round your intermediate calculations. Round
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
your final answer to nearest whole dollar amount.
IA IA IA IA IA IA IA
The reorder point is:
IA IA IA
A) 147 packages. IA
B) 1,440 packages. IA
C) 5,600 packages. IA
D) 350 packages. IA
E) 294 packages. IA
15) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
in 100-
A IA
sheet packages at a cost of $100 per package. Management estimates that the cost of placin
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
g and receiving a typical order is $15, and the annual cost of carrying a package in inventor
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
y is $1.50. Reflection Graphics uses 2,600 packages of paper each year. Production is const
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
ant, and the lead time to receive an order is one week.
IA IA IA IA IA IA IA IA IA IA IA
The reorder point is:
IA IA IA
A) 25 packages. IA
B) 50 packages. IA
C) 100 packages. IA
D) 203 packages. IA
E) 225 packages. IA
4
Value in a Dynamic Business Environment,
13th Edition by Ronald Hilton
Appendix III IA
1) The EOQ model is a mathematical tool for determining the order quantity that:
IA IA IA IA IA IA IA IA IA IA IA IA
A) maximizes the costs of ordering and holding inventory. IA IA IA IA IA IA IA
B) equals the costs of ordering and holding inventory.
IA IA IA IA IA IA IA
C) minimizes the costs of ordering and holding inventory. IA IA IA IA IA IA IA
All Chapters IA
D) has no effect on the costs of ordering and holding inventory.
IA IA IA IA IA IA IA IA IA IA
E) none of these answers are correct.
Answers Included
IA IA IA IA IA
IA
2) Inventory decisions involve a delicate balance between which of the following classes of
IA IA IA IA IA IA IA IA IA IA IA IA I
Acosts?
A) Ordering costs, advertising costs, and shipping costs
IA IA IA IA IA IA
B) Advertising costs, holding costs, and shortage costs IA IA IA IA IA IA
C) Ordering costs, holding costs, and shortage costs
IA IA IA IA IA IA
D) Ordering costs, shipping costs, and shortage costs
IA IA IA IA IA IA
E) Shipping costs, holding costs, and shortage costs
IA IA IA IA IA IA
3) Which one of the following is true of a just-in-time (JIT) system?
IA IA IA IA IA IA IA IA IA IA IA
A) JIT system uses a “pull” approach to controlling manufacturing
IA IA IA IA IA IA IA IA
B) Inventory of raw materials and parts are kept as a buffer
IA IA IA IA IA IA IA IA IA IA
C) Inventory of partially completed parts are kept as a buffer
IA IA IA IA IA IA IA IA IA
D) Finished goods are kept as a buffer IA IA IA IA IA IA
E) None of the answers are correct
IA IA IA IA IA
4) Which one of the following is true of Economic Order Quantity (EOQ)?
IA IA IA IA IA IA IA IA IA IA IA
A) The EOQ approach takes the view that some inventory is necessary in order to
IA IA IA IA IA IA IA IA IA IA IA IA IA I
Aoptimize the order quantity IA IA IA
B) Is calculates as the square root of the following: (2 × annual requirement × cost per
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
order) ÷ annual holding cost per unit
IA IA IA IA IA IA
C) The graphical approach is one method of calculating EOQ
IA IA IA IA IA IA IA IA
D) A mathematical tool for determining the order quantity that minimizes the cost of
IA IA IA IA IA IA IA IA IA IA IA IA I
Aordering and holding inventory IA IA IA
E) All of the answers are correct
IA IA IA IA IA
1
,5) Which of the following is a way that JIT efficiencies are achieved?
IA IA IA IA IA IA IA IA IA IA IA
A) Negotiating long-term supply agreements IA IA IA
B) Eliminating inspections IA
C) Reducing the number of vendors IA IA IA IA
D) Making less frequent payments IA IA IA
E) All of the answers are correct
IA IA IA IA IA
6) Inventory holding costs typically include:
IA IA IA IA
A) clerical costs of purchase-order preparation.
IA IA IA IA
B) costs of deterioration, theft, or spoilage.
IA IA IA IA IA
C) costs associated with lost sales to customers.
IA IA IA IA IA IA
D) forgone interest on money tied up in inventory.
IA IA IA IA IA IA IA
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in
IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
inventory.
A
7) Inventory holding costs would typically include all of the following except:
IA IA IA IA IA IA IA IA IA IA
A) insurance.
B) theft.
C) transportation.
D) obsolescence.
E) warehouse rent. IA
8) Which of the following is classified as an inventory shortage cost?
IA IA IA IA IA IA IA IA IA IA
A) Purchase order preparation IA IA
B) Production disruption IA
C) Lost sales and lost customers
IA IA IA IA
D) Spoilage
E) Both production disruption and lost sales and lost customers
IA IA IA IA IA IA IA IA
9) At the economic order quantity:
IA IA IA IA
A) total annual inventory costs, holding costs, and ordering costs are all minimized.
IA IA IA IA IA IA IA IA IA IA IA
B) total annual inventory costs and holding costs are minimized.
IA IA IA IA IA IA IA IA
C) total annual inventory costs are minimized, and holding costs equal ordering costs.
IA IA IA IA IA IA IA IA IA IA IA
D) total annual inventory costs are minimized, and holding costs exceed ordering costs.
IA IA IA IA IA IA IA IA IA IA IA
E) total annual inventory costs are minimized, and ordering costs exceed holding costs.
IA IA IA IA IA IA IA IA IA IA IA
2
,10) Langdon Enterprises uses an economic order quantity model and has determined an optimal
IA IA IA IA IA IA IA IA IA IA IA IA I
Aorder size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per order,
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
Aand holding costs are $6 per unit. The company's annual holding costs total:
IA IA IA IA IA IA IA IA IA IA IA IA
A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. IA IA IA IA IA
11) Langdon Enterprises uses an economic order quantity model and has determined an optimal
IA IA IA IA IA IA IA IA IA IA IA IA I
Aorder size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
holding costs are $4 per unit. The company's annual holding costs total:
IA IA IA IA IA IA IA IA IA IA IA IA
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. IA IA IA IA IA
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
in 310-
A IA
sheet packages at a cost of $310 per package. Management estimates that the cost of placin
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
g and receiving a typical order is $36, and the annual cost of carrying a package in inventor
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
y is $3.60. Reflection Graphics uses 4,700 packages of paper each year. Production is const
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
ant, and the lead time to receive an order is two week.
IA IA IA IA IA IA IA IA IA IA IA
The economic order quantity is approximately:
IA IA IA IA IA
Note: Round your final answer to the nearest whole number.
IA IA IA IA IA IA IA IA IA
A) 307 packages. IA
B) 4,018 packages. IA
C) 2,093 packages. IA
D) 1,636 packages. IA
E) 1,166 packages. IA
3
, 13) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
in 100-
A IA
sheet packages at a cost of $100 per package. Management estimates that the cost of placin
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
g and receiving a typical order is $15, and the annual cost of carrying a package in inventor
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
y is $1.50. Reflection Graphics uses 2,600 packages of paper each year. Production is const
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
ant, and the lead time to receive an order is one week.
IA IA IA IA IA IA IA IA IA IA IA
The economic order quantity is approximately:
IA IA IA IA IA
A) 203 packages. IA
B) 225 packages. IA
C) 228 packages. IA
D) 565 packages. IA
E) 631 packages. IA
14) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
in 350-
A IA
sheet packages at a cost of $350 per package. Management estimates that the cost of placin
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
g and receiving a typical order is $40, and the annual cost of carrying a package in inventor
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
y is $4.00. Reflection Graphics uses 5,100 packages of paper each year. Production is const
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
ant, and the lead time to receive an order is three weeks.
IA IA IA IA IA IA IA IA IA IA IA
Note: Assume 52 weeks in a year. Do not round your intermediate calculations. Round
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
your final answer to nearest whole dollar amount.
IA IA IA IA IA IA IA
The reorder point is:
IA IA IA
A) 147 packages. IA
B) 1,440 packages. IA
C) 5,600 packages. IA
D) 350 packages. IA
E) 294 packages. IA
15) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA I
in 100-
A IA
sheet packages at a cost of $100 per package. Management estimates that the cost of placin
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
g and receiving a typical order is $15, and the annual cost of carrying a package in inventor
IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA IA
y is $1.50. Reflection Graphics uses 2,600 packages of paper each year. Production is const
IA IA IA IA IA IA IA IA IA IA IA IA IA IA
ant, and the lead time to receive an order is one week.
IA IA IA IA IA IA IA IA IA IA IA
The reorder point is:
IA IA IA
A) 25 packages. IA
B) 50 packages. IA
C) 100 packages. IA
D) 203 packages. IA
E) 225 packages. IA
4
