Acctg 305 Spring 2011 Test 3 Practice Test Ch 20, 15, 17

# Acctg 305 Spring 2011 Test 3 Practice Test Ch 20, 15, 17 -...

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Binghamton University School of Management Accounting 305 Spring 2011 Test 3 Practice Test - Ch 20, 15,17 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Which of the following is NOT an example of an ordering cost? a. receiving costs b. salespeople’s salaries costs c. clerical costs of preparing documents d. insurance costs on shipment ____ 2. The cost of holding inventory is known as a. ordering cost. b. setup cost. c. stock-out cost. d. carrying cost. ____ 3. Safety stock is a. the cost of holding inventory. b. a non-value activity and should never be considered. c. not considered when calculating the reorder point. d. extra inventory carried to serve as insurance against fluctuations in demand. ____ 4. Which of the following equations determines the total annual ordering costs? a. Cost of placing an order times the order quantity. b. Cost of placing an order times the number of orders per year. c. Cost of placing an order times one-half of the order quantity. d. Unit carrying costs per year times the order quantity. ____ 5. Big Bus Company produces buses. In order to produce the seats for the buses, special equipment must be set up. The setup cost per frame is \$40. The cost of carrying seats in inventory is \$5 per seat per year. The company produces 100,000 buses per year. The number of seats that should be produced per setup in order to minimize the total setup and carrying costs is 12 March 2012 Page 1 of 25 7c9804831ffa49a7c6a44fb84bd664375f8a8644.doc

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a. 2,828 seats. b. 1,265 seats. c. 894 seats. d. 566 seats. ____ 6. American Supply Company has an economic order quantity for item A of 200 units. The annual demand for the product is 5,000 units, and the cost of placing an order is \$8. The carrying cost per unit is a. \$2.00. b. \$141.00. c. \$4.00. d. \$6.00. Figure 20 - 1 Jan's Candle Company manufactures candles. The company buys wax in 100-pound containers that cost \$15 each. The company uses 20,000 containers per year, and usage occurs evenly throughout the year. The average cost to carry a 100-pound container in inventory per year is \$2, and the cost to place an order is \$10. The company works 250 days per year. ____ 7. Refer to Figure 20-1. The economic order quantity (rounded) is a. 894 containers. b. 632 containers. c. 447 containers. d. 100 containers. ____ 8. Refer to Figure 20-1. The lead time is four working days and the average rate of usage is 80 containers per day. What is the reorder point? a. 340 containers b. 320 containers c. 300 containers d. 280 containers ____ 9. Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model. If demand remains the same, what is the impact on the number of orders made during the year? a.
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## This note was uploaded on 03/12/2012 for the course ACCT 211 taught by Professor Kamlet during the Spring '08 term at Binghamton.

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Acctg 305 Spring 2011 Test 3 Practice Test Ch 20, 15, 17 -...

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