Question 1

The reorder point is simplest to compute when either demand or lead time is certain.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is true?

Accepted Answer

A)  The reorder point is the point at which the amount of inventory on hand equals the amount needed to cover sales during the lead time. 
B)  The reorder point is the minimum level of inventory allowed during a particular period. 
C)  The safety stock is the amount of stock that must be on hand to cover sales during lead time. 
D)  The safety stock is the minimum level of inventory that must remain on hand. 
E)  The safety stock is the minimum level of inventory that must remain at the customers. 
A)  The reorder point is the point at which the amount of inventory on hand equals the amount needed to cover sales during the lead time. 
B)  The reorder point is the minimum level of inventory allowed during a particular period. 
C)  The safety stock is the amount of stock that must be on hand to cover sales during lead time. 
D)  The safety stock is the minimum level of inventory that must remain on hand. 
E)  The safety stock is the minimum level of inventory that must remain at the customers.

Question 3

Use the information below to answer the following question(s).
Fun 'N' Games manufactures various board games. For January there were no beginning inventories of direct materials, and no beginning or ending work in process. Only one indirect manufacturing cost category is currently in use, "Conversion Costs." Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing.
  
-Complete Microfilm Products manufactures microfilm cameras. For October there were no beginning inventories of direct materials, and no beginning or ending work in process. Only one indirect manufacturing cost category is currently in use, "Conversion Costs."   Which of the following entries would occur if the only trigger point is the production of finished units?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 4

Factors that are relevant in a JIT system, but not for the EOQ model, include

Accepted Answer

A)  quality of materials. 
B)  timeliness of deliveries. 
C)  stockout costs. 
D)  carrying costs. 
E)  quality of materials, timeliness of deliveries, and stockout costs. 
A)  quality of materials. 
B)  timeliness of deliveries. 
C)  stockout costs. 
D)  carrying costs. 
E)  quality of materials, timeliness of deliveries, and stockout costs.

Question 5

Backflush costing uses normal or standard costs.

Accepted Answer

A) True 
 B)False

Question 6

Use the information below to answer the following question(s).
Office Supply House purchases 4,160 reams of paper per year, ordered in lots of 80 reams per week at $150 per ream. The vendor covers all shipping costs. Office Supply House is not required to inspect the shipment upon entry. Office Supply House earns 20% on its cash investments. The purchase-order lead time is two weeks. The following cost data are available:
  
-What are the total relevant inventory costs at the economic-order quantity?

Accepted Answer

A)  $3,913.65 
B)  $3,948.50 
C)  $4,975.86 
D)  $6,238.62 
E)  $4,862.84 
A)  $3,913.65 
B)  $3,948.50 
C)  $4,975.86 
D)  $6,238.62 
E)  $4,862.84

Question 7

Use the information below to answer the following question(s).
Office Supply House purchases 4,160 reams of paper per year, ordered in lots of 80 reams per week at $150 per ream. The vendor covers all shipping costs. Office Supply House is not required to inspect the shipment upon entry. Office Supply House earns 20% on its cash investments. The purchase-order lead time is two weeks. The following cost data are available:
  
-Disc Company sells 400 discs per week. Purchase-order lead time is 3 weeks and the economic-order quantity is 900 units. What is the reorder point?

Accepted Answer

A)  950 units 
B)  1,200 units 
C)  3,500 units 
D)  4,500 units 
E)  5,600 units 
A)  950 units 
B)  1,200 units 
C)  3,500 units 
D)  4,500 units 
E)  5,600 units

Question 8

Safety stock is the buffer inventory held as a cushion against unexpected increases in demand or lead time, and unexpected unavailability of stock from suppliers.

Accepted Answer

A) True 
 B)False

Question 9

Purchasing costs consist of the costs of preparing and issuing a purchase order.

Accepted Answer

A) True 
 B)False

Question 10

Answer the following question(s) using the information below:
The Wood Furniture company produces a specialty wood furniture product, and has the following information available concerning its inventory items:
   Annual demand is 10,000 packages per year. The purchase price per package is $16.
-What are the total relevant costs, assuming the quantity ordered equals 500 units?

Accepted Answer

A)  $3,500 
B)  $500 
C)  $4,000 
D)  $3,750 
E)  $3,350 
A)  $3,500 
B)  $500 
C)  $4,000 
D)  $3,750 
E)  $3,350

Question 11

The economic-order-quantity decision model aids in the calculation of the optimal quantity of inventory to order.

Accepted Answer

A) True 
 B)False

Question 12

Ordering costs consist of the costs of goods acquired from suppliers including freight and transportation costs.

Accepted Answer

A) True 
 B)False

Question 13

Answer the following question(s) using the information below.
Walton Industries uses backflush costing. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing.
  
-Which of the following journal entries properly records the purchase of direct materials?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 14

Goal-congruence problems may occur when an inconsistency evolves between the decision model used and the model used to evaluate the performance of the person implementing the decision.

Accepted Answer

A) True 
 B)False

Question 15

Shrinkage costs result from water damage to clothing and other soft goods.

Accepted Answer

A) True 
 B)False

Question 16

Answer the following question(s) using the information below:
The Wood Furniture company produces a specialty wood furniture product, and has the following information available concerning its inventory items:
   Annual demand is 10,000 packages per year. The purchase price per package is $16.
-If Ferry Company has a safety stock of 160 units and the average daily demand is 20 units, how many days can be covered if the shipment from the supplier is delayed by 12 days?

Accepted Answer

A)  12.0 days 
B)  10.0 days 
C)  8.0 days 
D)  6.7 days 
E)  13.33 days 
A)  12.0 days 
B)  10.0 days 
C)  8.0 days 
D)  6.7 days 
E)  13.33 days

Question 17

Just-in-Time (JIT) Production is also called "lean production."

Accepted Answer

A) True 
 B)False

Question 18

The management accountant must design performance measures to evaluate and control JIT production. One of the dominant sources of information that the management accountant might use for this would be the personal observations of production line workers and team leaders. Another dominant source of information would be

Accepted Answer

A)  inventory turnover ratio. 
B)  nonfinancial measures of time, inventory and quality. 
C)  material cost variances. 
D)  number of units sent to scrap / total scrap costs. 
E)  total setup time for machines / total number of units started and completed. 
A)  inventory turnover ratio. 
B)  nonfinancial measures of time, inventory and quality. 
C)  material cost variances. 
D)  number of units sent to scrap / total scrap costs. 
E)  total setup time for machines / total number of units started and completed.

Question 19

Which of the following is NOT a component in a materials requirement planning system?

Accepted Answer

A)  lead times of all items to be purchased 
B)  master production schedule 
C)  bill of materials filed 
D)  standard construction times for all components produced externally 
E)  demand forecasts for finished goods 
A)  lead times of all items to be purchased 
B)  master production schedule 
C)  bill of materials filed 
D)  standard construction times for all components produced externally 
E)  demand forecasts for finished goods

Question 20

Tornado Electronics manufactures CD players. All processing is initiated when an order is received. For April 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:
   Required:
Record all journal entries for the monthly activities related to the above transactions if backflush costing
is used.

Accepted Answer

To record actual con

The reorder point is simplest to compute when either demand or lead time is certain.

Which of the following statements is true?

Factors that are relevant in a JIT system, but not for the EOQ model, include

Backflush costing uses normal or standard costs.

Safety stock is the buffer inventory held as a cushion against unexpected increases in demand or lead time, and unexpected unavailability of stock from suppliers.

Purchasing costs consist of the costs of preparing and issuing a purchase order.

The economic-order-quantity decision model aids in the calculation of the optimal quantity of inventory to order.

Ordering costs consist of the costs of goods acquired from suppliers including freight and transportation costs.

Goal-congruence problems may occur when an inconsistency evolves between the decision model used and the model used to evaluate the performance of the person implementing the decision.

Shrinkage costs result from water damage to clothing and other soft goods.

Just-in-Time (JIT) Production is also called "lean production."

Which of the following is NOT a component in a materials requirement planning system?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 20: Inventory Cost Management Strategies

The reorder point is simplest to compute when either demand or lead time is certain.

Which of the following statements is true?

Factors that are relevant in a JIT system, but not for the EOQ model, include

Backflush costing uses normal or standard costs.

Safety stock is the buffer inventory held as a cushion against unexpected increases in demand or lead time, and unexpected unavailability of stock from suppliers.

Purchasing costs consist of the costs of preparing and issuing a purchase order.

The economic-order-quantity decision model aids in the calculation of the optimal quantity of inventory to order.

Ordering costs consist of the costs of goods acquired from suppliers including freight and transportation costs.

Goal-congruence problems may occur when an inconsistency evolves between the decision model used and the model used to evaluate the performance of the person implementing the decision.

Shrinkage costs result from water damage to clothing and other soft goods.

Just-in-Time (JIT) Production is also called "lean production."

Which of the following is NOT a component in a materials requirement planning system?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters