FNAN 522 MOD 7 QUESTIONS & ANSWERS
A company has a holding cost per unit of $5. Each order has a fixed cost of $8 and the
annual demand quantity is 150,000 units. What is the company's optimal order quantity?
- Answer -693 units
A company that manufactures 4th of July decorations is looking to improve its inventory
management. Which of the following should it consider as it redesigns its inventory
system?
a. It should analyze its cash flow so it has enough cash to purchase its stock.
b. It should review its past sales data to determine the pattern of demand for its goods.
c. All of these answers.
d. It should calculate the lag time in its supply chain. - Answer -c. All of these answers.
A company values its inventory by assuming that the most recently produced items are
sold first. This inventory valuation method is known as ___.
a. Moving Average Cost Method
b. LIFO
c. Weighted Average Cost Method
d. FIFO - Answer -LIFO
A customer has 45 days from the date of invoice to pay a bill in full, but if he pays within
15 days of the invoice, he gets a 10% discount. Which of the following describes these
terms of trade?
a. 10/15, net 45.
b. 15/45, net 10.
c. 10/45, net 15.
d. 15/10, net 45. - Answer -a. 10/15, net 45
If a company has yet to receive payment for its goods, which of the following describes
a situation when it can recognize revenue from the sale?
a. Once the company has sustained a portion of the costs associated with providing the
good or service.
b. Once the company has performed a portion of the services to be provided.
c. When the goods have been delivered and the title has been transferred to the buyer.
d. All of these answers. - Answer -c. When the goods have been delivered and the title
has been transferred to the buyer.
Which of the following is a reason a company would hold marketable securities?
a. To obtain a return instead of letting the funds remain idle.
b. To serve as a substitute for cash balances.
c. All of these answers.
d. To ensure that the company can meet known financial requirements, such as
maturing bond issues. - Answer -c. All of these answers.
A company has a holding cost per unit of $5. Each order has a fixed cost of $8 and the
annual demand quantity is 150,000 units. What is the company's optimal order quantity?
- Answer -693 units
A company that manufactures 4th of July decorations is looking to improve its inventory
management. Which of the following should it consider as it redesigns its inventory
system?
a. It should analyze its cash flow so it has enough cash to purchase its stock.
b. It should review its past sales data to determine the pattern of demand for its goods.
c. All of these answers.
d. It should calculate the lag time in its supply chain. - Answer -c. All of these answers.
A company values its inventory by assuming that the most recently produced items are
sold first. This inventory valuation method is known as ___.
a. Moving Average Cost Method
b. LIFO
c. Weighted Average Cost Method
d. FIFO - Answer -LIFO
A customer has 45 days from the date of invoice to pay a bill in full, but if he pays within
15 days of the invoice, he gets a 10% discount. Which of the following describes these
terms of trade?
a. 10/15, net 45.
b. 15/45, net 10.
c. 10/45, net 15.
d. 15/10, net 45. - Answer -a. 10/15, net 45
If a company has yet to receive payment for its goods, which of the following describes
a situation when it can recognize revenue from the sale?
a. Once the company has sustained a portion of the costs associated with providing the
good or service.
b. Once the company has performed a portion of the services to be provided.
c. When the goods have been delivered and the title has been transferred to the buyer.
d. All of these answers. - Answer -c. When the goods have been delivered and the title
has been transferred to the buyer.
Which of the following is a reason a company would hold marketable securities?
a. To obtain a return instead of letting the funds remain idle.
b. To serve as a substitute for cash balances.
c. All of these answers.
d. To ensure that the company can meet known financial requirements, such as
maturing bond issues. - Answer -c. All of these answers.
