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