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