Inventory management

Among different types of costs associated with inventory, the costs of obtaining purchase approvals are ________.

• purchasing costs
• ordering costs 
• stockout costs 
• carrying costs

Among different types of costs associated with inventory, the opportunity cost of the investment tied up in inventory is a(n) ________.

• purchasing cost 
• ordering cost
• stockout cost
• carrying cost

Under  economic-order-quantity decision model, it is assumed that ________.

• the quantity ordered can vary at each reorder point 
• demand, ordering costs, and carrying costs are uncertain
• the purchasing cost per unit is affected by the order quantity
• no inventory stockouts occur

The purchase-order lead time is the ________.

• time between placing an order and its delivery
• time between receiving a customer order and producing the products 
• ) time between receiving a customer order and delivering the items 
• time required to correct errors in the defective products 

Which of the following costs is a relevant inventory stockout cost under EOQ decision model?

• The costs of obsolescence and costs of insurance that change with the quantity of inventory held.
• The return forgone by investing capital in inventory rather than elsewhere.
• The lost contribution margin on sales forgone as a result of customer dissatisfaction due to unavailability of goods.
• The costs of storage space owned that cannot be used for other profitable purposes when inventories decrease.

Which of the following statements  is true of just-in-time (JIT) purchasing?

• In JIT purchasing, the optimal safety-stock level is the quantity of safety stock that minimizes the sum of annual relevant stockout and carrying costs.
• ) JIT purchasing is guided solely by the EOQ model because that model emphasizes the tradeoff between relevant carrying and ordering costs.
• In JIT purchasing, raw materials (or goods) are purchased so that products are delivered just as needed for production or sales.
• Only disadvantage of JIT purchasing is the higher level carrying and inspection costs.

Under backflush costing approach, the purchase of materials is ________.

• credited to the Materials and In-Process Inventory Control account
• debited to the Materials and In-Process Inventory Control account
• debited to the Materials Inventory Control account
• credited to the Materials Inventory Control account

Which of the following statements best defines backflush costing system?

• an integrated costing system covering a company's accounting, distribution, manufacturing, purchasing, human resources, and other functions
• a costing 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
• a push-through system in which each component in a production line is produced immediately as needed by the next step in the production line
• a costing system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities

Vision Company manufactures digital cameras. For May, 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 units are sold.
Which of the following journal entries properly reflects the purchase of materials under backflush costing?

• Dr Inventory Control; Cr Accounts Payable Control
• Dr Accounts Payable Control; Cr Allocated Costs: Direct Materials
• Dr Accounts Payable Control; Cr Materials Inventory
• Dr Allocated Costs: Direct Materials; Cr Inventory: Raw and Material

Which of the following statements best defines a trigger point in a sequential-tracking costing system?

• the inventory level at which a new purchase order is generated
• the point at which the sum of annual relevant stockout and ordering costs is minimal
• the production level at which the costing system becomes incapable of tracking the production costs
• a stage in the production cycle at which journal entries are made in the accounting system