Question 1

In managing inventory,what is a category of costs pertaining to quality?
Variant question

Accepted Answer

A) Ordering costs 
B) Purchasing costs 
C) Prevention costs 
D) Stockout costs 
A) Ordering costs 
B) Purchasing costs 
C) Prevention costs 
D) Stockout costs

Question 2

The economic order quantity (EOQ)(EOQ)ignores:

Accepted Answer

A) purchasing costs. 
B) relevant ordering costs. 
C) stockout costs. 
D) Both A and C are correct. 
A) purchasing costs. 
B) relevant ordering costs. 
C) stockout costs. 
D) Both A and C are correct.

Question 3

The costs of expediting an order from a supplier in response to a stockout include the additional ordering costs,plus any associated transportation costs.

Accepted Answer

A) True 
 B)False

Question 4

Answer the following questions using the information below:
North Ryde Optics sells optical equipment.Vision Lenses manufactures special glass lenses.North Ryde Optics orders 10 400 lenses per year,200 per week at $20 per lens.Vision Lenses covers all shipping costs.North Ryde Optics earns 30% on its cash investments.The purchase-order lead time is 2.5 weeks.North Ryde Optics sells 250 lenses per week.The following data are available:
 Relevant ordering costs per purchase order $\quad\quad\quad \$ 21.25 $
 Relevant insurance, materials handling, breakage, 
and so on, per year$\quad\quad\quad\quad\$2.50$

-What is the reorder point?

Accepted Answer

A) 415.5 lenses 
B) 625 lenses 
C) 397.5 lenses 
D) 441 lenses 
A) 415.5 lenses 
B) 625 lenses 
C) 397.5 lenses 
D) 441 lenses

Question 5

In managing inventory,the costs associated with inventory obsolescence are included in which of these cost categories?

Accepted Answer

A) Ordering costs 
B) Labour costs 
C) Quality costs 
D) Carrying costs 
A) Ordering costs 
B) Labour costs 
C) Quality costs 
D) Carrying costs

Question 6

Answer the following questions using the information below:
Computer Supplies is a distributor of DVDs.Music 4U is a local retail outlet which sells blank and recorded DVDs.Music 4U purchases DVDs from Computer Supplies at $0.25 per DVD;DVDs are shipped in packages of 100.Computer Supplies pays all incoming freight,and Music 4U does not inspect the DVDs due to Computer Supplies' reputation for high quality.Annual demand is 416 000 DVDs at a rate of 8000 DVDs per week.Music 4U earns 15% on its cash investments.The purchase-order lead time is one week.The following cost data are available:
 Relevant ordering costs per purchase order $\quad\quad\$ 94.50$
Carrying costs per package per year:
Relevant insurance, materials handling,
breakage, etc, per year $\quad\$ 3.50$
-What are the relevant total costs?

Accepted Answer

A) $1951.70 
B) $3583.77 
C) $6150.50 
D) $2560.20 
A) $1951.70 
B) $3583.77 
C) $6150.50 
D) $2560.20

Question 7

The optimal safety stock level is the quantity of safety stock that minimises the sum of the annual relevant:

Accepted Answer

A) ordering costs and purchasing costs. 
B) stockout costs and carrying costs. 
C) ordering costs and carrying costs. 
D) ordering costs and stockout costs. 
A) ordering costs and purchasing costs. 
B) stockout costs and carrying costs. 
C) ordering costs and carrying costs. 
D) ordering costs and stockout costs.

Question 8

The only product of a company has an annual demand of 2000 units.The cost of placing an order is $40 and the cost of carrying one unit in inventory for one year is $16.
Required:
Determine the economic order quantity (EOQ).

Accepted Answer

The square root of [

Question 9

Answer the following questions using the information below:
The following information applies to Dental Labs Plus,which supplies dental burs (used in dental drills)to dentists throughout Victoria.Dental Labs Plus purchases the dental burs from a manufacturer which has a reputation for very high quality in its manufacturing operation.
 $$\begin{array} { l l } 
\text { Antual demand (weekly demand = 1/52 of annual demand) } & 31200 \text { units } \
\text { Orders per year } & 25 \
\text { Lead time in days } & 20 \text { days } \
\text { Cost of placing an order } & \$ 100
\end{array}$$
-What are the annual relevant carrying costs,assuming each order was made at the economic-order-quantity (EOQ)amount?

Accepted Answer

A) $1000 
B) $6000 
C) $2500 
D) $200 
A) $1000 
B) $6000 
C) $2500 
D) $200

Question 10

More 'rush' orders occur when inventory data is shared throughout the supply chain.
Variant question

Accepted Answer

A) True 
 B)False

Question 11

The return foregone by investing capital in inventory rather than elsewhere is referred to as the relevant opportunity cost of capital in relation to inventory.
Variant question

Accepted Answer

A) True 
 B)False

Question 12

If Ballart Collectibles Inc.has a safety stock of 70 units and the average weekly demand is 21 units,how many days can be covered if the shipment from the supplier is delayed?

Accepted Answer

A) 21 days 
B) 23.3 days 
C) 35 days 
D) 3.3 days 
A) 21 days 
B) 23.3 days 
C) 35 days 
D) 3.3 days

Question 13

In relation to inventory management,shrinkage costs result from water damage to clothing and other soft goods.

Accepted Answer

A) True 
 B)False

Question 14

Answer the following questions using the information below:
North Ryde Optics sells optical equipment.Vision Lenses manufactures special glass lenses.North Ryde Optics orders 10 400 lenses per year,200 per week at $20 per lens.Vision Lenses covers all shipping costs.North Ryde Optics earns 30% on its cash investments.The purchase-order lead time is 2.5 weeks.North Ryde Optics sells 250 lenses per week.The following data are available:
 Relevant ordering costs per purchase order $\quad\quad\quad \$ 21.25 $
 Relevant insurance, materials handling, breakage, 
and so on, per year$\quad\quad\quad\quad\$2.50$

-What is the economic order quantity (EOQ)for North Ryde Optics?

Accepted Answer

A) 325 lenses 
B) 210 lenses 
C) 297 lenses 
D) 228 lenses 
A) 325 lenses 
B) 210 lenses 
C) 297 lenses 
D) 228 lenses

Question 15

Answer the following questions using the information below:
The following information applies to Dental Labs Plus,which supplies dental burs (used in dental drills)to dentists throughout Victoria.Dental Labs Plus purchases the dental burs from a manufacturer which has a reputation for very high quality in its manufacturing operation.
 $$\begin{array} { l l } 
\text { Antual demand (weekly demand = 1/52 of annual demand) } & 31200 \text { units } \
\text { Orders per year } & 25 \
\text { Lead time in days } & 20 \text { days } \
\text { Cost of placing an order } & \$ 100
\end{array}$$
-What is the economic order quantity (EOQ)assuming each order was made at the economic-order-quantity (EOQ)amount?

Accepted Answer

A) 1560 units 
B) 1040 units 
C) 1248 units 
D) 500 units 
A) 1560 units 
B) 1040 units 
C) 1248 units 
D) 500 units

Question 16

The freight and transportation costs on goods acquired from suppliers are generally included in purchasing costs.
Variant question

Accepted Answer

A) True 
 B)False

Question 17

Bendigo Visual Corporation manufactures screens for laptop computers.All processing is initiated when an order is received.For March there were no beginning inventories.Conversion Costs and Direct Materials are the only manufacturing cost accounts.Direct Materials are purchased under a just-in-time system.Backflush costing is used with a finished goods trigger point.Additional information is as follows:
 $$\begin{array} { | l | l | } 
\hline \text { Actual conversion costs } & \$ 1740000 \
\hline \text { Standard materials costs per unit } & \$ 230 \
\hline \text { Standard conversion cost per unit } & \$ 170 \
\hline \text { Units produced } & 23700 \
\hline \text { Units sold } & 22800 \
\hline
\end{array}$$ 
Required:
Record all journal entries for the monthly activities related to the above transactions if backflush costing is used.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

To record actual conversion costs:
 \[\b

Question 18

The CEO of Robotics Limited is concerned because the cost of materials has not been in line with the budget for several periods,even after implementing an EOQ model.The company has the normal direct material variance computations of price and efficiency at the end of each month.The price variance of the direct materials used is usually near expectations.The CEO does not understand how the budget differences are always larger than the material price variances.
Required:
What explanation can you give for the evaluation problems presented?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

An EOQ model does not solve all inventor

Question 19

In a backflush-costing system,no record of work-in-process appears in the accounting records.

Accepted Answer

A) True 
 B)False

Question 20

Redfern Butchery orders most of its items in lot sizes of 10 units.Average annual demand per side of venison is 720 units per year.Ordering costs are $32.50 per order with an average purchasing price of $130.Annual inventory carrying costs are estimated to be 40% of the unit cost.
Required:
a.Determine the economic order quantity (EOQ).
b.Determine the annual cost savings if the shop changes from an order size of 10 units to the economic order quantity (EOQ).
c.Since the shelf life is limited,the Redfern Butchery must keep the inventory moving.Assuming a 360-day year,determine the optimal lot size under each of the following: (1)a 20-day shelf life and (2)a 10-day shelf life.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.The square root of [(2 × 720 × $32.50)

In managing inventory,what is a category of costs pertaining to quality? Variant question

The economic order quantity (EOQ)(EOQ)ignores:

The costs of expediting an order from a supplier in response to a stockout include the additional ordering costs,plus any associated transportation costs.

In managing inventory,the costs associated with inventory obsolescence are included in which of these cost categories?

The optimal safety stock level is the quantity of safety stock that minimises the sum of the annual relevant:

The only product of a company has an annual demand of 2000 units.The cost of placing an order is $40 and the cost of carrying one unit in inventory for one year is $16. Required: Determine the economic order quantity (EOQ).

More 'rush' orders occur when inventory data is shared throughout the supply chain. Variant question

The return foregone by investing capital in inventory rather than elsewhere is referred to as the relevant opportunity cost of capital in relation to inventory. Variant question

If Ballart Collectibles Inc.has a safety stock of 70 units and the average weekly demand is 21 units,how many days can be covered if the shipment from the supplier is delayed?

In relation to inventory management,shrinkage costs result from water damage to clothing and other soft goods.

The freight and transportation costs on goods acquired from suppliers are generally included in purchasing costs. Variant question

In a backflush-costing system,no record of work-in-process appears in the accounting records.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 17: Inventory Management, Just-In-Time and Simplified Costing Methods

In managing inventory,what is a category of costs pertaining to quality? Variant question

The economic order quantity (EOQ)(EOQ)ignores:

The costs of expediting an order from a supplier in response to a stockout include the additional ordering costs,plus any associated transportation costs.

In managing inventory,the costs associated with inventory obsolescence are included in which of these cost categories?

The optimal safety stock level is the quantity of safety stock that minimises the sum of the annual relevant:

The only product of a company has an annual demand of 2000 units.The cost of placing an order is $40 and the cost of carrying one unit in inventory for one year is $16. Required: Determine the economic order quantity (EOQ).

More 'rush' orders occur when inventory data is shared throughout the supply chain. Variant question

The return foregone by investing capital in inventory rather than elsewhere is referred to as the relevant opportunity cost of capital in relation to inventory. Variant question

If Ballart Collectibles Inc.has a safety stock of 70 units and the average weekly demand is 21 units,how many days can be covered if the shipment from the supplier is delayed?

In relation to inventory management,shrinkage costs result from water damage to clothing and other soft goods.

The freight and transportation costs on goods acquired from suppliers are generally included in purchasing costs. Variant question

In a backflush-costing system,no record of work-in-process appears in the accounting records.

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters