1
,Test Bank Managerial Accounting: Creating Value in a Dynamic Business Envir
zl zl zl zl zl zl zl zl zl zl
onment, 13th Edition by Ronald Hilton zl zl zl zl zl
Appendix III zl
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. zl zl zl zl zl zl zl
B) equals the costs of ordering and holding inventory.
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C) minimizes the costs of ordering and holding inventory. zl zl zl zl zl zl zl
All Chapters zl
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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2) Inventory decisions involve a delicate balance between which of the following classes of co
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sts?
A) Ordering costs, advertising costs, and shipping costs
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B) Advertising costs, holding costs, and shortage costs zl zl zl zl zl zl
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 zl zl zl zl zl zl
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 zl zl zl zl zl zl zl zl zl zl
C) Inventory of partially completed parts are kept as a buffer zl zl zl zl zl zl zl zl zl
D) Finished goods are kept as a buffer zl zl zl zl zl zl
E) None of the answers are correct zl zl zl zl zl
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 op
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timize the order quantity zl zl zl
B) Is calculates as the square root of the following: (2 × annual requirement × cost per or
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der) ÷ annual holding cost per unit
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C) The graphical approach is one method of calculating EOQ
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D) A mathematical tool for determining the order quantity that minimizes the cost of or
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dering and holding inventory zl zl zl
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?
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A) Negotiating long-term supply agreements zl zl zl
B) Eliminating inspections zl
C) Reducing the number of vendors zl zl zl zl
D) Making less frequent payments zl zl zl
E) All of the answers are correct
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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.
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C) costs associated with lost sales to customers.
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D) forgone interest on money tied up in inventory.
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E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in in
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ventory.
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. zl
8) Which of the following is classified as an inventory shortage cost?
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A) Purchase order preparation zl zl
B) Production disruption zl
C) Lost sales and lost customerszl zl zl zl
D) Spoilage
E) Both production disruption and lost sales and lost customers
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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.
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C) total annual inventory costs are minimized, and holding costs equal ordering costs.
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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.
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3
, 10) Langdon Enterprises uses an economic order quantity model and has determined an optimal or
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der size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per order, and h
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olding costs are $6 per unit. The company's annual holding costs total:
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A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. zl zl zl zl zl
11) Langdon Enterprises uses an economic order quantity model and has determined an optimal or
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der size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and holdi
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ng costs are $4 per unit. The company's annual holding costs total:
zl zl zl zl zl zl zl zl zl zl zl
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. zl zl zl zl zl
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in
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310-
sheet packages at a cost of $310 per package. Management estimates that the cost of placing a
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nd receiving a typical order is $36, and the annual cost of carrying a package in inventory is $3
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.60. Reflection Graphics uses 4,700 packages of paper each year. Production is constant, and t
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he 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. zl
B) 4,018 packages. zl
C) 2,093 packages. zl
D) 1,636 packages. zl
E) 1,166 packages. zl
4
,Test Bank Managerial Accounting: Creating Value in a Dynamic Business Envir
zl zl zl zl zl zl zl zl zl zl
onment, 13th Edition by Ronald Hilton zl zl zl zl zl
Appendix III zl
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. zl zl zl zl zl zl zl
B) equals the costs of ordering and holding inventory.
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C) minimizes the costs of ordering and holding inventory. zl zl zl zl zl zl zl
All Chapters zl
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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2) Inventory decisions involve a delicate balance between which of the following classes of co
zl zl zl zl zl zl zl zl zl zl zl zl zl
sts?
A) Ordering costs, advertising costs, and shipping costs
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B) Advertising costs, holding costs, and shortage costs zl zl zl zl zl zl
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 zl zl zl zl zl zl
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 zl zl zl zl zl zl zl zl zl zl
C) Inventory of partially completed parts are kept as a buffer zl zl zl zl zl zl zl zl zl
D) Finished goods are kept as a buffer zl zl zl zl zl zl
E) None of the answers are correct zl zl zl zl zl
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 op
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timize the order quantity zl zl zl
B) Is calculates as the square root of the following: (2 × annual requirement × cost per or
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
der) ÷ annual holding cost per unit
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C) The graphical approach is one method of calculating EOQ
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D) A mathematical tool for determining the order quantity that minimizes the cost of or
zl zl zl zl zl zl zl zl zl zl zl zl zl
dering and holding inventory zl zl zl
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?
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A) Negotiating long-term supply agreements zl zl zl
B) Eliminating inspections zl
C) Reducing the number of vendors zl zl zl zl
D) Making less frequent payments zl zl zl
E) All of the answers are correct
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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.
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C) costs associated with lost sales to customers.
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D) forgone interest on money tied up in inventory.
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E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in in
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
ventory.
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. zl
8) Which of the following is classified as an inventory shortage cost?
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A) Purchase order preparation zl zl
B) Production disruption zl
C) Lost sales and lost customerszl zl zl zl
D) Spoilage
E) Both production disruption and lost sales and lost customers
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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.
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C) total annual inventory costs are minimized, and holding costs equal ordering costs.
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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.
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3
, 10) Langdon Enterprises uses an economic order quantity model and has determined an optimal or
zl zl zl zl zl zl zl zl zl zl zl zl zl
der size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per order, and h
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
olding costs are $6 per unit. The company's annual holding costs total:
zl zl zl zl zl zl zl zl zl zl zl
A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. zl zl zl zl zl
11) Langdon Enterprises uses an economic order quantity model and has determined an optimal or
zl zl zl zl zl zl zl zl zl zl zl zl zl
der size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and holdi
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
ng costs are $4 per unit. The company's annual holding costs total:
zl zl zl zl zl zl zl zl zl zl zl
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. zl zl zl zl zl
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
310-
sheet packages at a cost of $310 per package. Management estimates that the cost of placing a
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
nd receiving a typical order is $36, and the annual cost of carrying a package in inventory is $3
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
.60. Reflection Graphics uses 4,700 packages of paper each year. Production is constant, and t
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
he lead time to receive an order is two week.
zl zl zl zl zl zl zl zl zl
The economic order quantity is approximately:
zl zl zl zl zl
Note: Round your final answer to the nearest whole number.
zl zl zl zl zl zl zl zl zl
A) 307 packages. zl
B) 4,018 packages. zl
C) 2,093 packages. zl
D) 1,636 packages. zl
E) 1,166 packages. zl
4
