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