Question Details

51. At the optimal order quantity size, the: 
A. total cost of holding inventory is fully offset by the restocking costs.
B. carrying costs are equal to zero.
C. restocking costs are equal to zero.
D. total costs equal the carrying costs.
E. carrying costs equal the restocking costs.

52. The EOQ model is designed to minimize: 
A. production costs.
B. inventory obsolescence.
C. the carrying costs of inventory.
D. the costs of replenishing inventory.
E. the total costs of holding inventory.

53. Which one of the following items is most likely a derived-demand inventory item? 
A. cereal ready to be bagged and shipped to stores
B. tires held in inventory by an auto maker
C. shoes on display in a retail store
D. toys ready to be shipped to toy stores
E. wheat harvested by a farmer

54. Inventory needs under a derived-demand inventory system are: 
A. primarily dependent upon the competitive demands placed on a firm's suppliers.
B. based on the anticipated demand for the finished product.
C. based on minimizing the cost of restocking inventory.
D. held constant over time.
E. determined by a kanban system.

55. A just-in-time inventory system:
I. when implemented properly reduces the cost of inventory to zero.
II. increases the inventory turnover rate.
III. is sufficient to handle immediate production needs.
IV. minimizes the costs of holding inventory. 
A. I and III only
B. II and IV only
C. I, II, and IV only
D. II, III, and IV only
E. I, II, III, and IV

56. The incremental investment in receivables under the accounts receivable approach is equal to: 
A. P - vQ¢.
B. PQ¢.
C. PQ + v(Q¢ - Q).
D. P(Q¢ - Q).
E. PQ(Q¢ - Q).

57. The accounts receivable approach to credit policy supports the theory that: 
A. a firm's risk of offering credit to a new customer is limited to the variable cost of the sold items.
B. the best credit policy is an all-cash policy.
C. the cost of offering credit to a new customer is the same as the cost of offering credit to an existing customer.
D. foregoing cash discounts is a method of obtaining inexpensive short-term financing.
E. the default risk of a credit policy is the same as the default risk under an all cash-policy if your customers remain the same.

58. Which two of the following are the key elements in determining whether or not a switch from a no-credit policy to a credit policy is advisable?
I. variable cost per unit
II. cash discount percentage
III. credit price
IV. default rate 
A. I and III only
B. II and IV only
C. II and III only
D. I and IV only
E. III and IV only

59. On average, your firm sells $38,700 of items on credit each day. The firm's average operating cycle is 49 days and it acquires and sells inventory, on average, every 17 days. What is the average accounts receivable balance? 
A. $657,900
B. $848,000
C. $1,238,400
D. $1,315,500
E. $1,896,300

60. The Winter Store just purchased $48,300 of goods from its supplier with credit terms of 1/10, net 25. What is the discounted price? 
A. $43,470
B. $46,209
C. $47,817
D. $47,929
E. $48,300

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