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