Question 1

The costs of storage space owned are always relevant costs of carrying inventory.

Accepted Answer

A) True 
 B)False

Question 2

The IBP Grocery orders most of its items in lot sizes of 10 units.Average annual demand per side of beef is 720 units per year.Ordering costs are $25 per order with an average purchasing price of $100.Annual inventory carrying costs are estimated to be 40% of the unit cost.
Required:
a.Determine the economic order quantity.
b.Determine the annual cost savings if the shop changes from an order size of 10 units to the economic order quantity.
c.Since the shelf life is limited,the IBP Grocery 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 × $25)/ $

Question 3

Answer the following questions using the information below:
The following information applies to Krynton Corp. which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation.
 $\begin{array}{lr}
\text { Annual demand (weekly demand }=1 / 52 \text { of annual demand) } & 13,000 \text { units } \
\text { Orders per year as per EOQ model } & 13 \
\text { Lead time in days } & 15 \text { days } \
\text { Annual relevant carrying costs } & \$ 2,600
\end{array}$
-If Kenton Inc.has a safety stock of 175 units and the average weekly demand is 25 units,how many days can be covered if the shipment from the supplier is delayed by 12 days?

Accepted Answer

A)  12 days 
B)  49 days 
C)  61 days 
D)  37 days 
A)  12 days 
B)  49 days 
C)  61 days 
D)  37 days

Question 4

In a just-in-time production system,inventory carrying costs would be high.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true of lean accounting?

Accepted Answer

A)  It is much complex than traditional product costing. 
B)  It does not always compute costs for individual products. 
C)  It omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods. 
D)  It compares value stream costs against costs that include costs of all purchased materials. 
A)  It is much complex than traditional product costing. 
B)  It does not always compute costs for individual products. 
C)  It omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods. 
D)  It compares value stream costs against costs that include costs of all purchased materials.

Question 6

The annual relevant total costs are at a minimum when relevant ________.

Accepted Answer

A)  ordering costs are greater than the relevant carrying costs 
B)  carrying costs are greater than the relevant ordering costs 
C)  carrying costs are equal to relevant ordering costs 
D)  carrying costs are equal to relevant purchasing costs 
A)  ordering costs are greater than the relevant carrying costs 
B)  carrying costs are greater than the relevant ordering costs 
C)  carrying costs are equal to relevant ordering costs 
D)  carrying costs are equal to relevant purchasing costs

Question 7

To comply with GAAP,backflush cost numbers can be adjusted by recording a journal entry.

Accepted Answer

A) True 
 B)False

Question 8

Due to unprecedented growth during the year,Flowers by Kelly decided to use some of its surplus cash to increase the size of several inventory order quantities that had been previously determined using an EOQ model.
Required:
Identify whether increasing the size of inventory orders will increase,decrease,or have no effect on each of the following items.
 ___a. Average inventory
___b. Cost of goods sold
___c. Number of orders per year
___d. Total annual carrying costs
___e. Total anunual carrying and ordering costs
___f. Total annual ordering costs

Accepted Answer

The answer of Due to unprecedented growth during the year,Flowers...

Question 9

Stockout costs arise when an organization experiences an ability to deliver its goods to its customers.

Accepted Answer

A) True 
 B)False

Question 10

A grouping of all the different types of equipment used to make a given product is referred to as ________.

Accepted Answer

A)  total quality management 
B)  materials requirements planning 
C)  manufacturing cells 
D)  economic order quantity 
A)  total quality management 
B)  materials requirements planning 
C)  manufacturing cells 
D)  economic order quantity

Question 11

Backflush costing does not strictly adhere to generally accepted accounting principles.Explain why.Also,describe the types of businesses that might use backflush costing.

Accepted Answer

The principal reason why backflush costi

Question 12

Tracing more costs as direct costs to value streams is impossible because companies using lean accounting do not dedicate resources to individual value streams.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is true of the economic-order-quantity decision model?

Accepted Answer

A)  It assumes purchasing costs are relevant because the cost per unit changes due to the quantity ordered. 
B)  It assumes that quality costs are considered only to the extent that these costs affect ordering or carrying costs. 
C)  It assumes that stockout costs are relevant even if no stockouts occur. 
D)  It assumes that ordering costs and carrying costs are irrelevant. 
A)  It assumes purchasing costs are relevant because the cost per unit changes due to the quantity ordered. 
B)  It assumes that quality costs are considered only to the extent that these costs affect ordering or carrying costs. 
C)  It assumes that stockout costs are relevant even if no stockouts occur. 
D)  It assumes that ordering costs and carrying costs are irrelevant.

Question 14

Answer the following questions using the information below:
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases tapes from Globe at $25.00 per DVD; DVDs are shipped in packages of 60. Globe pays all incoming freight, and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality. Annual demand is 312,000 DVDs at a rate of 6,000 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available:
 $\begin{array} { l  }
 \text { Relevant ordering costs per purchase order}&\$114.50 \ \text {arrying costs per package per year: }& \
 \text {Relevant insurance, materials handling, }& \ \text {breakage, etc., per year }&\$4.50 \
\end{array}$

-What is the economic order quantity?

Accepted Answer

A)  64.08 packages 
B)  21.04 packages 
C)  37.50 packages 
D)  72.03 packages 
A)  64.08 packages 
B)  21.04 packages 
C)  37.50 packages 
D)  72.03 packages

Question 15

What are the total relevant costs,assuming the quantity ordered equals 1,000 units?

Accepted Answer

A)  $17,100 
B)  $16,500 
C)  $15,500 
D)  $19,100 
A)  $17,100 
B)  $16,500 
C)  $15,500 
D)  $19,100

Question 16

The costs that result when a company runs out of a particular item for which there is a customer demand are ________.

Accepted Answer

A)  shrinkage costs 
B)  shortage costs 
C)  stockout costs 
D)  EOQ estimation costs 
A)  shrinkage costs 
B)  shortage costs 
C)  stockout costs 
D)  EOQ estimation costs

Question 17

The accounting procedures in a backflush-costing system strictly adhere to Generally Accepted Accounting Principles (GAAP).

Accepted Answer

A) True 
 B)False

Question 18

Most firms try not to hold more inventory than necessary because shrinkage costs generally decrease when a firm's inventory increases.

Accepted Answer

A) True 
 B)False

Question 19

The time required to get equipment,tools,and materials ready to start production is referred to as ________.

Accepted Answer

A)  setup time 
B)  delivery time 
C)  manufacturing-cycle time 
D)  product design time 
A)  setup time 
B)  delivery time 
C)  manufacturing-cycle time 
D)  product design time

Question 20

Which of the following statements best defines lean accounting?

Accepted Answer

A)  an accounting system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities 
B)  a costing method that supports creating value for the customer by costing the entire value stream thereby eliminating waste in the accounting process 
C)  an accounting system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods 
D)  an integrated costing system covering a company's accounting, distribution, manufacturing, purchasing, human resources, and other functions 
A)  an accounting system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities 
B)  a costing method that supports creating value for the customer by costing the entire value stream thereby eliminating waste in the accounting process 
C)  an accounting system that omits recording some of the journal entries relating to the stages from the purchase of direct materials to the sale of finished goods 
D)  an integrated costing system covering a company's accounting, distribution, manufacturing, purchasing, human resources, and other functions

The costs of storage space owned are always relevant costs of carrying inventory.

In a just-in-time production system,inventory carrying costs would be high.

Which of the following statements is true of lean accounting?

The annual relevant total costs are at a minimum when relevant ________.

To comply with GAAP,backflush cost numbers can be adjusted by recording a journal entry.

Stockout costs arise when an organization experiences an ability to deliver its goods to its customers.

A grouping of all the different types of equipment used to make a given product is referred to as ________.

Backflush costing does not strictly adhere to generally accepted accounting principles.Explain why.Also,describe the types of businesses that might use backflush costing.

Tracing more costs as direct costs to value streams is impossible because companies using lean accounting do not dedicate resources to individual value streams.

Which of the following statements is true of the economic-order-quantity decision model?

What are the total relevant costs,assuming the quantity ordered equals 1,000 units?

The costs that result when a company runs out of a particular item for which there is a customer demand are ________.

The accounting procedures in a backflush-costing system strictly adhere to Generally Accepted Accounting Principles (GAAP).

Most firms try not to hold more inventory than necessary because shrinkage costs generally decrease when a firm's inventory increases.

The time required to get equipment,tools,and materials ready to start production is referred to as ________.

Which of the following statements best defines lean accounting?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 20: Inventory Management, just-In-Time, and Simplified Costing Methods

The costs of storage space owned are always relevant costs of carrying inventory.

In a just-in-time production system,inventory carrying costs would be high.

Which of the following statements is true of lean accounting?

The annual relevant total costs are at a minimum when relevant ________.

To comply with GAAP,backflush cost numbers can be adjusted by recording a journal entry.

Stockout costs arise when an organization experiences an ability to deliver its goods to its customers.

A grouping of all the different types of equipment used to make a given product is referred to as ________.

Backflush costing does not strictly adhere to generally accepted accounting principles.Explain why.Also,describe the types of businesses that might use backflush costing.

Tracing more costs as direct costs to value streams is impossible because companies using lean accounting do not dedicate resources to individual value streams.

Which of the following statements is true of the economic-order-quantity decision model?

What are the total relevant costs,assuming the quantity ordered equals 1,000 units?

The costs that result when a company runs out of a particular item for which there is a customer demand are ________.

The accounting procedures in a backflush-costing system strictly adhere to Generally Accepted Accounting Principles (GAAP).

Most firms try not to hold more inventory than necessary because shrinkage costs generally decrease when a firm's inventory increases.

The time required to get equipment,tools,and materials ready to start production is referred to as ________.

Which of the following statements best defines lean accounting?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters