Test Bank
Test Managerial Accounting:
Bank Managerial Creating
Accounting: Value Value
Creating in a Dynamic Business
in a Dynamic Business
Environment, 13th Edition by Ronald Hilton
Environment, 13th Edition by Ronald Hilton
Appendix III tx
1) The EOQ model is a mathematical tool for determining the order quantity that:
tx tx tx tx tx tx tx tx tx tx tx tx
A) maximizes the costs of ordering and holding inventory. tx tx tx tx tx tx tx
B) equals the costs of ordering and holding inventory. tx tx tx tx tx tx tx
C) minimizes the costs of ordering and holding inventory. tx tx tx tx tx tx tx
All Chapters tx
D) has no effect on the costs of ordering and holding inventory.
tx tx tx tx tx tx tx tx tx tx
E) none of these answers are correct.
Answers Included
tx tx tx tx tx
tx
2) Inventory decisions involve a delicate balance between which of the following classes of cost
tx tx tx tx tx tx tx tx tx tx tx tx tx
s?
A) Ordering costs, advertising costs, and shipping costs tx tx tx tx tx tx
B) Advertising costs, holding costs, and shortage costs tx tx tx tx tx tx
C) Ordering costs, holding costs, and shortage costs tx tx tx tx tx tx
D) Ordering costs, shipping costs, and shortage costs tx tx tx tx tx tx
E) Shipping costs, holding costs, and shortage costs tx tx tx tx tx tx
3) Which one of the following is true of a just-in-time (JIT) system?
tx tx tx tx tx tx tx tx tx tx tx
A) JIT system uses a “pull” approach to controlling manufacturing
tx tx tx tx tx tx tx tx
B) Inventory of raw materials and parts are kept as a buffer tx tx tx tx tx tx tx tx tx tx
C) Inventory of partially completed parts are kept as a buffer tx tx tx tx tx tx tx tx tx
D) Finished goods are kept as a buffer tx tx tx tx tx tx
E) None of the answers are correct tx tx tx tx tx
4) Which one of the following is true of Economic Order Quantity (EOQ)?
tx tx tx tx tx tx tx tx tx tx tx
A) The EOQ approach takes the view that some inventory is necessary in order to opti
tx tx tx tx tx tx tx tx tx tx tx tx tx tx
mize the order quantity tx tx tx
B) Is calculates as the square root of the following: (2 × annual requirement × cost per orde
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
r) ÷ annual holding cost per unit
tx tx tx tx tx tx
C) The graphical approach is one method of calculating EOQ
tx tx tx tx tx tx tx tx
D) A mathematical tool for determining the order quantity that minimizes the cost of ord
tx tx tx tx tx tx tx tx tx tx tx tx tx
ering and holding inventory tx tx tx
E) All of the answers are correct
tx tx tx tx tx
1
,5) Which of the following is a way that JIT efficiencies are achieved?
tx tx tx tx tx tx tx tx tx tx tx
A) Negotiating long-term supply agreements tx tx tx
B) Eliminating inspections tx
C) Reducing the number of vendors tx tx tx tx
D) Making less frequent payments tx tx tx
E) All of the answers are correct
tx tx tx tx tx
6) Inventory holding costs typically include:
tx tx tx tx
A) clerical costs of purchase-order preparation.
tx tx tx tx
B) costs of deterioration, theft, or spoilage.
tx tx tx tx tx
C) costs associated with lost sales to customers.
tx tx tx tx tx tx
D) forgone interest on money tied up in inventory. tx tx tx tx tx tx tx
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in inve
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
ntory.
7) Inventory holding costs would typically include all of the following except:
tx tx tx tx tx tx tx tx tx tx
A) insurance.
B) theft.
C) transportation.
D) obsolescence.
E) warehouse rent. tx
8) Which of the following is classified as an inventory shortage cost?
tx tx tx tx tx tx tx tx tx tx
A) Purchase order preparation tx tx
B) Production disruption tx
C) Lost sales and lost customerstx tx tx tx
D) Spoilage
E) Both production disruption and lost sales and lost customers
tx tx tx tx tx tx tx tx
9) At the economic order quantity:
tx tx tx tx
A) total annual inventory costs, holding costs, and ordering costs are all minimized.
tx tx tx tx tx tx tx tx tx tx tx
B) total annual inventory costs and holding costs are minimized.
tx tx tx tx tx tx tx tx
C) total annual inventory costs are minimized, and holding costs equal ordering costs.
tx tx tx tx tx tx tx tx tx tx tx
D) total annual inventory costs are minimized, and holding costs exceed ordering costs.
tx tx tx tx tx tx tx tx tx tx tx
E) total annual inventory costs are minimized, and ordering costs exceed holding costs.
tx tx tx tx tx tx tx tx tx tx tx
2
,10) Langdon Enterprises uses an economic order quantity model and has determined an optimal ord
tx tx tx tx tx tx tx tx tx tx tx tx tx
er size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per order, and holdi
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
ng costs are $6 per unit. The company's annual holding costs total:
tx tx tx tx tx tx tx tx tx tx tx
A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. tx tx tx tx tx
11) Langdon Enterprises uses an economic order quantity model and has determined an optimal ord
tx tx tx tx tx tx tx tx tx tx tx tx tx
er size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and holding
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
costs are $4 per unit. The company's annual holding costs total:
tx tx tx tx tx tx tx tx tx tx
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. tx tx tx tx tx
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in 31
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
0-
sheet packages at a cost of $310 per package. Management estimates that the cost of placing and
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
receiving a typical order is $36, and the annual cost of carrying a package in inventory is $3.60.
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
Reflection Graphics uses 4,700 packages of paper each year. Production is constant, and the lea
tx tx tx tx tx tx tx tx tx tx tx tx tx tx
d time to receive an order is two week.
tx tx tx tx tx tx tx tx
The economic order quantity is approximately:
tx tx tx tx tx
Note: Round your final answer to the nearest whole number.
tx tx tx tx tx tx tx tx tx
A) 307 packages. tx
B) 4,018 packages. tx
C) 2,093 packages. tx
D) 1,636 packages. tx
E) 1,166 packages. tx
3
, 13) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in 10
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
0-
sheet packages at a cost of $100 per package. Management estimates that the cost of placing and
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
receiving a typical order is $15, and the annual cost of carrying a package in inventory is $1.50.
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
Reflection Graphics uses 2,600 packages of paper each year. Production is constant, and the lea
tx tx tx tx tx tx tx tx tx tx tx tx tx tx
d time to receive an order is one week.
tx tx tx tx tx tx tx tx
The economic order quantity is approximately:
tx tx tx tx tx
A) 203 packages. tx
B) 225 packages. tx
C) 228 packages. tx
D) 565 packages. tx
E) 631 packages. tx
14) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in 35
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
0-
sheet packages at a cost of $350 per package. Management estimates that the cost of placing and
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
receiving a typical order is $40, and the annual cost of carrying a package in inventory is $4.00.
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
Reflection Graphics uses 5,100 packages of paper each year. Production is constant, and the lea
tx tx tx tx tx tx tx tx tx tx tx tx tx tx
d time to receive an order is three weeks.
tx tx tx tx tx tx tx tx
Note: Assume 52 weeks in a year. Do not round your intermediate calculations. Round your
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
final answer to nearest whole dollar amount.
tx tx tx tx tx tx
The reorder point is:
tx tx tx
A) 147 packages. tx
B) 1,440 packages. tx
C) 5,600 packages. tx
D) 350 packages. tx
E) 294 packages. tx
15) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased in 10
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
0-
sheet packages at a cost of $100 per package. Management estimates that the cost of placing and
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
receiving a typical order is $15, and the annual cost of carrying a package in inventory is $1.50.
tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx tx
Reflection Graphics uses 2,600 packages of paper each year. Production is constant, and the lea
tx tx tx tx tx tx tx tx tx tx tx tx tx tx
d time to receive an order is one week.
tx tx tx tx tx tx tx tx
The reorder point is:
tx tx tx
A) 25 packages. tx
B) 50 packages. tx
C) 100 packages. tx
D) 203 packages. tx
E) 225 packages. tx
4
