1
,ManagerialAccounting:Creating Valuein a Dynamic Business Environment, 13t h b
3 b3 b
3 b3 b3 b3 b3 b3 b3
Edition by Ronald Hilton
b3 b3 b3 b3
Appendix III b3
1) The EOQ model is a mathematical tool for determining the order quantity that:
b3 b 3 b3 b 3 b3 b 3 b 3 b3 b 3 b3 b 3 b 3
A) maximizes the costs of ordering and holding inventory. b 3 b 3 b3 b3 b 3 b 3 b3
B) equals the costs of ordering and holding inventory.
b 3 b3 b 3 b 3 b 3 b 3 b 3
C) minimizes the costs of ordering and holding invento b 3 b3 b3 b3 b 3 b 3 b3
All Chapters
b3
ry.
D) has no effect on the costs of ordering and holding invent
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
or y. b3
E) none of these answers are corre
Answers Included
b3 b3 b3 b3 b3
c t
b3
b 3
.
2) Inventory decisions involve a delicate balance between which of the following class
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
es of costs?
b3 b3
A) Ordering costs, advertising costs, and shipping costs b3 b 3 b 3 b3 b 3 b3
B) Advertising costs, holding costs, and shortage costs b3 b 3 b3 b 3 b3 b3
C) Ordering costs, holding costs, and shortage costs b3 b 3 b3 b 3 b3 b3
D) Ordering costs, shipping costs, and shortage costs b3 b 3 b3 b 3 b 3 b3
E) Shipping costs, holding costs, and shortage costs b3 b 3 b3 b3 b 3 b 3
3) Which b3 one of the following is true of a just-in-time (JIT) system?
b3 b 3 b3 b 3 b 3 b3 b3 b 3 b3 b 3
A) JIT system uses a “pull” approach to controlling manufacturing
b3 b 3 b 3 b3 b 3 b 3 b 3 b3
B) Inventory of raw materials and parts are kept as a buffer
b3 b 3 b3 b 3 b 3 b 3 b 3 b3 b 3 b 3
C) Inventory of partially completed parts are kept as a buffer
b3 b 3 b 3 b 3 b 3 b3 b 3 b 3 b3
D) Finished goods are kept as a buffer b3 b 3 b3 b3 b 3 b3
E) None of the answers are correct
b3 b 3 b 3 b 3 b3
4) Which one of the following is true of Economic Order Quantity (EOQ)?
b 3 b3 b 3 b3 b 3 b 3 b 3 b 3 b3 b 3 b 3
A) The EOQ approach takes the view that some inventory is necessary in orde
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
r t o optimize the order quantity
b3 b3 b3 b3 b3 b3
B) Is calculates as the square root of the following: (2 × annual requirement × cos
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
t p er order) ÷ annual holding cost per unit
b3 b3 b3 b3 b3 b3 b3 b3 b3
C) The graphical approach is one method of calculating EOQ
b3 b 3 b3 b 3 b3 b3 b 3 b 3
D) A mathematical tool for determining the order quantity that minimizes the co
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
st of ordering and holding inventory
b3 b3 b3 b3 b3
E) All of the answers are correct
b 3 b3 b 3 b3 b 3
2
,5) Which of the following is a way that JIT efficiencies are achieved?
b3 b 3 b3 b3 b 3 b3 b 3 b 3 b 3 b 3 b 3
A) Negotiating long-term supply agreements
b3 b 3 b 3
B) Eliminating inspections b 3
C) Reducing the number of vendors
b 3 b3 b 3 b3
D) Making less frequent payments
b3 b3 b 3
E) All of the answers are correct
b 3 b3 b 3 b3 b 3
6) Inventory holding costs typically include:
b3 b 3 b3 b 3
A) clerical costs of purchase-order preparation.
b3 b3 b3 b3
B) costs of deterioration, theft, or spoilage.
b3 b3 b 3 b 3 b3
C) costs associated with lost sales to customers.
b3 b 3 b3 b3 b 3 b3
D) forgone interest on money tied up in inventory.
b3 b 3 b 3 b 3 b 3 b3 b 3
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied u
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
p i n inventory.
b3 b3 b3
7) Inventory holding costs would typically include all of the following except:
b3 b 3 b3 b 3 b 3 b3 b 3 b 3 b 3 b 3
A) insurance.
B) theft.
C) transportation.
D) obsolescence.
E) warehouse rent. b3
8) Which of the following is classified as an inventory shortage cost?
b3 b 3 b3 b3 b 3 b 3 b 3 b3 b 3 b 3
A) Purchase order preparationb3 b 3
B) Production disruption b 3
C) Lost sales and lost customers
b 3 b 3 b 3 b 3
D) Spoilage
E) Both production disruption and lost sales and lost customers
b3 b 3 b 3 b3 b3 b 3 b 3 b 3
9) At the economic order quantity:
b 3 b3 b3 b 3
A) total annual inventory costs,
b3 b 3 b 3 b3 holding costs, and ordering costs are all minimized.
b3 b 3 b3 b3 b 3 b3 b 3
B) total annual inventory costs
b3 b 3 b 3 b3 and holding costs are minimized.
b 3 b 3 b 3 b3
C) total annual inventory costs
b3 b 3 b3 b 3 are minimized, and holding costs equal ordering costs.
b3 b3 b 3 b 3 b3 b 3 b 3
D) total annual inventory costs
b3 b3 b 3 b3 are minimized, and holding costs exceed ordering costs.
b3 b3 b 3 b3 b 3 b3 b 3
E) total annual inventory costs
b3 b3 b 3 b3 are minimized, and ordering costs exceed holding costs.
b3 b 3 b3 b3 b 3 b3 b 3
3
, 10) Langdon Enterprises uses an economic order quantity model and has determined an optim
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
a l order size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per
b3 b3 b3 b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3 b3 b3
o rder
b3
, and holding costs are $6 per unit. The company's annual holding costs total:
b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3
A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. b3 b 3 b3 b 3 b 3
11) Langdon Enterprises uses an economic order quantity model and has determined an optim
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
al order size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per
b 3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
orde r
b3 b3
, and holding costs are $4 per unit. The company's annual holding costs total:
b3 b 3 b 3 b 3 b 3 b 3 b 3 b3 b 3 b 3 b 3 b 3 b 3
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. b3 b 3 b3 b 3 b 3
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purcha
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
s e d in 310-
b3 b3 b3 b3
sheet packages at a cost of $310 per package. Management estimates that the cost of pla
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
cin g and receiving a typical order is $36, and the annual cost of carrying a package in in
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ventor y is $3.60. Reflection Graphics uses 4,700 packages of paper each year. Productio
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
n is con stant, and the lead time to receive an order is two week.
b 3 b 3 b3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3
The economic order quantity is approximately:
b3 b 3 b 3 b 3 b 3
Note: Round your final answer to the nearest whole number.
b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3
A) 307 packages. b 3
B) 4,018 packages. b 3
C) 2,093 packages. b 3
D) 1,636 packages. b 3
E) 1,166 packages. b 3
4
,ManagerialAccounting:Creating Valuein a Dynamic Business Environment, 13t h b
3 b3 b
3 b3 b3 b3 b3 b3 b3
Edition by Ronald Hilton
b3 b3 b3 b3
Appendix III b3
1) The EOQ model is a mathematical tool for determining the order quantity that:
b3 b 3 b3 b 3 b3 b 3 b 3 b3 b 3 b3 b 3 b 3
A) maximizes the costs of ordering and holding inventory. b 3 b 3 b3 b3 b 3 b 3 b3
B) equals the costs of ordering and holding inventory.
b 3 b3 b 3 b 3 b 3 b 3 b 3
C) minimizes the costs of ordering and holding invento b 3 b3 b3 b3 b 3 b 3 b3
All Chapters
b3
ry.
D) has no effect on the costs of ordering and holding invent
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
or y. b3
E) none of these answers are corre
Answers Included
b3 b3 b3 b3 b3
c t
b3
b 3
.
2) Inventory decisions involve a delicate balance between which of the following class
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
es of costs?
b3 b3
A) Ordering costs, advertising costs, and shipping costs b3 b 3 b 3 b3 b 3 b3
B) Advertising costs, holding costs, and shortage costs b3 b 3 b3 b 3 b3 b3
C) Ordering costs, holding costs, and shortage costs b3 b 3 b3 b 3 b3 b3
D) Ordering costs, shipping costs, and shortage costs b3 b 3 b3 b 3 b 3 b3
E) Shipping costs, holding costs, and shortage costs b3 b 3 b3 b3 b 3 b 3
3) Which b3 one of the following is true of a just-in-time (JIT) system?
b3 b 3 b3 b 3 b 3 b3 b3 b 3 b3 b 3
A) JIT system uses a “pull” approach to controlling manufacturing
b3 b 3 b 3 b3 b 3 b 3 b 3 b3
B) Inventory of raw materials and parts are kept as a buffer
b3 b 3 b3 b 3 b 3 b 3 b 3 b3 b 3 b 3
C) Inventory of partially completed parts are kept as a buffer
b3 b 3 b 3 b 3 b 3 b3 b 3 b 3 b3
D) Finished goods are kept as a buffer b3 b 3 b3 b3 b 3 b3
E) None of the answers are correct
b3 b 3 b 3 b 3 b3
4) Which one of the following is true of Economic Order Quantity (EOQ)?
b 3 b3 b 3 b3 b 3 b 3 b 3 b 3 b3 b 3 b 3
A) The EOQ approach takes the view that some inventory is necessary in orde
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
r t o optimize the order quantity
b3 b3 b3 b3 b3 b3
B) Is calculates as the square root of the following: (2 × annual requirement × cos
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
t p er order) ÷ annual holding cost per unit
b3 b3 b3 b3 b3 b3 b3 b3 b3
C) The graphical approach is one method of calculating EOQ
b3 b 3 b3 b 3 b3 b3 b 3 b 3
D) A mathematical tool for determining the order quantity that minimizes the co
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
st of ordering and holding inventory
b3 b3 b3 b3 b3
E) All of the answers are correct
b 3 b3 b 3 b3 b 3
2
,5) Which of the following is a way that JIT efficiencies are achieved?
b3 b 3 b3 b3 b 3 b3 b 3 b 3 b 3 b 3 b 3
A) Negotiating long-term supply agreements
b3 b 3 b 3
B) Eliminating inspections b 3
C) Reducing the number of vendors
b 3 b3 b 3 b3
D) Making less frequent payments
b3 b3 b 3
E) All of the answers are correct
b 3 b3 b 3 b3 b 3
6) Inventory holding costs typically include:
b3 b 3 b3 b 3
A) clerical costs of purchase-order preparation.
b3 b3 b3 b3
B) costs of deterioration, theft, or spoilage.
b3 b3 b 3 b 3 b3
C) costs associated with lost sales to customers.
b3 b 3 b3 b3 b 3 b3
D) forgone interest on money tied up in inventory.
b3 b 3 b 3 b 3 b 3 b3 b 3
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied u
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
p i n inventory.
b3 b3 b3
7) Inventory holding costs would typically include all of the following except:
b3 b 3 b3 b 3 b 3 b3 b 3 b 3 b 3 b 3
A) insurance.
B) theft.
C) transportation.
D) obsolescence.
E) warehouse rent. b3
8) Which of the following is classified as an inventory shortage cost?
b3 b 3 b3 b3 b 3 b 3 b 3 b3 b 3 b 3
A) Purchase order preparationb3 b 3
B) Production disruption b 3
C) Lost sales and lost customers
b 3 b 3 b 3 b 3
D) Spoilage
E) Both production disruption and lost sales and lost customers
b3 b 3 b 3 b3 b3 b 3 b 3 b 3
9) At the economic order quantity:
b 3 b3 b3 b 3
A) total annual inventory costs,
b3 b 3 b 3 b3 holding costs, and ordering costs are all minimized.
b3 b 3 b3 b3 b 3 b3 b 3
B) total annual inventory costs
b3 b 3 b 3 b3 and holding costs are minimized.
b 3 b 3 b 3 b3
C) total annual inventory costs
b3 b 3 b3 b 3 are minimized, and holding costs equal ordering costs.
b3 b3 b 3 b 3 b3 b 3 b 3
D) total annual inventory costs
b3 b3 b 3 b3 are minimized, and holding costs exceed ordering costs.
b3 b3 b 3 b3 b 3 b3 b 3
E) total annual inventory costs
b3 b3 b 3 b3 are minimized, and ordering costs exceed holding costs.
b3 b 3 b3 b3 b 3 b3 b 3
3
, 10) Langdon Enterprises uses an economic order quantity model and has determined an optim
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
a l order size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per
b3 b3 b3 b3 b3 b3 b3 b3 b3 v# b3 b3 b3 b3 b3 b3 b3 b3
o rder
b3
, and holding costs are $6 per unit. The company's annual holding costs total:
b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3
A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. b3 b 3 b3 b 3 b 3
11) Langdon Enterprises uses an economic order quantity model and has determined an optim
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
al order size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per
b 3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
orde r
b3 b3
, and holding costs are $4 per unit. The company's annual holding costs total:
b3 b 3 b 3 b 3 b 3 b 3 b 3 b3 b 3 b 3 b 3 b 3 b 3
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. b3 b 3 b3 b 3 b 3
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purcha
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
s e d in 310-
b3 b3 b3 b3
sheet packages at a cost of $310 per package. Management estimates that the cost of pla
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
cin g and receiving a typical order is $36, and the annual cost of carrying a package in in
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
ventor y is $3.60. Reflection Graphics uses 4,700 packages of paper each year. Productio
b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3 b3
n is con stant, and the lead time to receive an order is two week.
b 3 b 3 b3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3
The economic order quantity is approximately:
b3 b 3 b 3 b 3 b 3
Note: Round your final answer to the nearest whole number.
b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3 b 3
A) 307 packages. b 3
B) 4,018 packages. b 3
C) 2,093 packages. b 3
D) 1,636 packages. b 3
E) 1,166 packages. b 3
4
