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WorksheetsAMA MCQ FINAL
Total questions: 90
Worksheet time: 47mins
The costs of goods acquired from suppliers including incoming freight or transportation costs are:
purchasing costs
ordering costs
stockout costs
carrying costs
internal failure costs
purchasing costs
ordering costs
stockout costs
carrying costs
quality cost
opportunity cost of the investment tied up in inventory
purchasing costs
ordering costs
stockout costs
carrying costs
quality cost
spoilage of stored items
purchasing costs
ordering costs
stockout costs
carrying costs
quality cost
costs of lost sales as a result of not having an item requested by a customer
purchasing costs
ordering costs
stockout costs
carrying costs
quality cost
The costs of preparing, issuing, and paying purchase orders, plus receiving and inspecting the items included in orders is:
purchasing costs
ordering costs
stockout costs
carrying costs
costs of matching invoices received to the items and the purchase orders
purchasing costs
ordering costs
stockout costs
carrying costs
The costs that result from theft of inventory are:
shrinkage costs
external failure costs
stockout costs
costs of quality
costs of wages for work-in-process inspections
shrinkage costs
external failure costs
stockout costs
costs of quality
costs resulting from embezzlement by employees
shrinkage costs
external failure costs
stockout costs
costs of quality
costs that result from clerical error
shrinkage costs
external failure costs
stockout costs
costs of quality
The costs that result when a company runs out of a particular item for which there is a customer demand are:
shrinkage costs
shortage costs
stockout costs
EOQ estimation costs
The costs that result when features and characteristics of a product or service are NOT in conformance with the specifications are:
inspection costs
costs of quality
purchasing costs
design costs
The costs that result when a company holds an inventory of goods for sale:
purchasing costs
carrying costs
opportunity costs
interest costs
Quality costs include:
purchasing costs
ordering costs
stockout costs
prevention costs
Obsolescence is an example of which cost category?
carrying costs
labor costs
ordering costs
quality costs
The costs associated with storage are an example of which cost category?
quality costs
labor costs
ordering costs
carrying costs
Which of the following is an assumption of the economic-order-quantity decision model?
The quantity ordered can vary at each reorder point.
Demand ordering costs and carrying costs fluctuate.
There will be timely labor costs.
No stockouts occur
The economic order quantity ignores:
purchasing costs
relevant ordering costs
stockout costs
The purchase order lead-time is:
difference between the times an order is placed and delivered
difference between the products ordered and the products received
discrepancies in purchase orders
time required to correct errors in the products received
Which of the following statements about the economic-order-quantity decision model is FALSE?
It assumes purchasing costs are relevant when the cost per unit changes due to the quantity ordered.
It assumes quality costs are irrelevant if quality is unaffected by the number of units purchased.
It assumes stockout costs are irrelevant if no stockouts occur.
It assumes ordering costs and carrying costs are relevant.
Relevant total costs in the economic-order-quantity decision model equal relevant ordering costs plus relevant:
carrying costs
stockout costs
quality costs
purchasing costs
The annual relevant total costs are at a minimum when relevant:
ordering costs are greater than the relevant carrying costs
carrying costs are greater than the relevant ordering costs
carrying costs are equal to relevant ordering costs
None of these answers is correct.
The optimal safety stock level is the quantity of safety stock that minimizes the sum of the annual relevant:
stockout costs and carrying costs
ordering costs and carrying costs
ordering costs and stockout costs
ordering costs and purchasing costs
The reorder point is simplest to compute when:
both demand and purchase-order lead times are known with certainty
the number of units sold varies
the safety stock amount never varies
the relevant ordering costs and the relevant carrying costs are equal
The annual relevant carrying costs of inventory consists of the sum of the:
ordering costs and carrying costs
stockout costs and carrying costs
incremental costs plus the opportunity costs of capital
incremental costs plus the carrying costs
Just-in-time purchasing requires:
larger and less frequent purchase orders
smaller and less frequent purchase orders
smaller and more frequent purchase orders
larger and more frequent purchase orders
Increases in the carrying cost and decreases in the ordering cost per purchase order result in:
smaller EOQ amounts
larger EOQ amounts
larger relevant total costs
smaller relevant total costs
A push-through system that manufactures finished goods for inventory on the basis of demand forecasts is referred to as:
just-in-time purchasing
materials requirements planning
relevant total costs
economic order quantity
A demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line is referred to as:
just-in-time purchasing
materials requirements planning
relevant total costs
economic order quantity
The time required to get equipment, tools, and materials ready to start production is referred to as:
setup time
manufacturing lead time
pass-through time
None of these answers is correct.
All of the following are potential financial benefits of just-in-time EXCEPT:
lower investments in inventories
lower investments in plant space for inventories
reducing the risk of obsolescence
reducing manufacturing lead time
system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities is known as a(n):
economic order quantity (EOQ) system
enterprise requirements planning (ERP) system
just-in-time (JIT) system
material requirements planning (MRP) system
One DISADVANTAGE of an enterprise resource planning (ERP) system is:
the use of standard costing systems is not allowed
these systems are not in accordance with Generally Accepted Accounting Principles (GAAP)
the systems must often be customized to fit the strategic needs of the user
the systems increase lead times when purchasing material from a supplier
Which of the following involves significant financial investments in projects to develop new products, expand production capacity, or remodel current production facilities?
capital budgeting
working capital
master budgeting
project-cost budgeting
The stage of the capital budgeting process that distinguishes which types of capital expenditure projects are necessary to accomplish organization objectives is the:
identify projects stage
make predictions stage
obtain information stage
make decisions by choosing among alternatives stage
The stage of the capital budgeting process during which marketing is queried for potential revenue numbers is the:
identify projects stage
obtain information stage
make predictions stage
make decisions by choosing among alternatives stage
The stage of the capital budgeting process that considers the expected costs and the expected benefits of alternative capital investments is the:
identify projects stage
make decisions by choosing among alternatives stage
obtain information stage
make predictions stage
The stage of the capital budgeting process that chooses projects for implementation is the:
make decisions by choosing among alternatives stage
make predictions stage
identify projects stage
management-control stage
The stage of the capital-budgeting process in which projects get underway and performance is monitored is the:
implement the decision, evaluate performance, and learn stage
make predictions stage
identify projects stage
management-control stage
The stage of the capital budgeting process in which a firm obtains funding for the project is the:
make decisions by choosing among alternatives stage.
make predictions stage.
obtain information stage.
implement the decision, evaluate performance, and learn stage.
The two factors capital budgeting emphasizes are:
qualitative and nonfinancial
quantitative and nonfinancial
quantitative and financial
qualitative and financial
Which capital budgeting technique(s) measure all expected future cash inflows and outflows as if they occurred at a single point in time?
net present value
internal rate of return
payback
Discounted cash flow methods for capital budgeting focus on:
cash inflows
operating income
cash outflows
Net present value is calculated using the:
internal rate of return
required rate of return
rate of return required by the investment bankers
None of these answers is correct.
The capital budgeting method which calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time using the required rate of return is the:
payback method
accrual accounting rate-of-return method
sensitivity method
net present value method
The capital budgeting method that calculates the discount rate at which the present value of expected cash inflows from a project equals the present value of expected cash outflows is the:
net present value method
accrual accounting rate-of-return method
payback method
internal rate of return
Which of the following is NOT an appropriate term for the required rate of return?
discount rate
hurdle rate
cost of capital
All of these answers are correct.
The definition of an annuity is:
similar to the definition of a life insurance policy
a series of equal cash flows at intervals
an investment product whose funds are invested in the stock market
Both A and B are correct.
In capital budgeting, a project is accepted only if the internal rate of return equals or:
exceeds the required rate of return
is less than the required rate of return
exceeds the net present value
exceeds the accrual accounting rate of return
In situations where the required rate of return is NOT constant for each year of the project, it is advantageous to use:
the adjusted rate-of-return method
the internal rate-of-return method
the net present value method
sensitivity analysis
The method that measures the time it will take to recoup, in the form of future cash inflows, the total dollars invested in a project is called:
the accrued accounting rate-of-return method
payback method
internal rate-of-return method
the book-value method
The payback method of capital budgeting approach to the investment decision highlights:
cash flow over the life of the investment
the liquidity of the investment
the tax savings of the depreciation amounts
having as lengthy payback time as possible
The approach to capital budgeting which divides an accounting measure of income by an accounting measure of investment is the:
net present value
internal rate of return
payback method
accrual accounting rate of return
For capital budgeting decisions, the use of the accrual accounting rate of return for evaluating performance is often a stumbling block to the implementation of the:
net cash flow
most effective goal-congruence choice
discounted cash flow method for capital budgeting
most effective tax strategy
The most significant manager evaluation and goal congruence issues arise because of inconsistencies between the following methods of choosing among alternatives for capital budgeting purposes:
net present value method and the internal rate of return method
payback method and the net present value method
net present value method and the accrual accounting rate of return method
payback method and the internal rate of return method
In the analysis of a capital budgeting proposal, for which of the following items are there NO after-tax consequences?
cash flow from operations
gain or loss on the disposal of the asset
reduction of working capital balances at the end of the useful life of the capital asset
None of these answers is correct.
The relevant terminal disposal price of a machine equals the:
difference between the salvage value of the old machine and the ultimate salvage value of the new machine
total of the salvage values of the old machine and the new machine
salvage value of the old machine
salvage value of the new machine
costs of obtaining purchase approvals
ordering cost
purchasing cost
stockout cost
quality cost
carrying cost
.............is the purchase of materials or goods so they are delivered just as needed
for production or sales.
JIT
MRP
ERP
EOQ
a “demand-pull” manufacturing system that
manufactures each component in a production line as soon as and only
when needed by the next step in the production line
JIT
MRP
ERP
EOQ
a “push-through” system that manufactures finished goods for inventory on
the basis of demand forecasts
JIT
MRP
ERP
EOQ
is a system with a single database that collects data and feeds it into
software applications supporting all of a firm’s business activities
JIT
MRP
ERP
EOQ
............. is planning, coordinating, and
controlling activities related to the flow of inventory into,
through, and out of an organization
JIT
MRP
ERP
EOQ
Inventory management
Relevant Costs in JIT Purchasing
Purchasing costs
Ordering cost
Stockout costs
Quality costs
Carrying cost
Relevant Costs in JEOQ ignores.............
Purchasing costs
Ordering cost
Stockout costs
Quality costs
Carrying cost
Relevant inventory carrying costs consist of
relevent costing of quality and
relevant incremental costs/ relevant
opportunity cost of capital
relevant incremental cost
Basic EOQ Assumptions
There are only
ordering and stockout
costs.
There are only
ordering and carrying
costs.
There are only
purchasing and carrying
costs.
Basic EOQ Assumptions
There are only
ordering and stockout
costs.
No stockouts occur
The same quantity is
ordered at each
reorder point
one project spans multiple accounting periods
Project dimension
Accounting period
dimension
one period contains multiple projects
Project dimension
Accounting period
dimension
measure all expected future cash inflows and outflows of a
project as if they occurred at a single point in time.
DFC
NPV
IRR
AARR
RRR is also called
discount rate
hurdle rate
cost of capital
opportunity cost of capital.
internal rate of return
explicit rules, procedures, performance measures, and incentive plans that guide the behavior of its managers and other employees.
Formal systems
Informal systems
shared values, loyalties, and mutual commitments among members of the company, corporate culture, and unwritten norms about acceptable behavior.
Formal systems
Informal systems
the freedom for managers at lower levels of the organization to make
decisions.
Centralization
Decentralization
Autonomy
Leads to suboptimal decision making ( incongruent decision making or dysfunctional decision making )
Centralization
Decentralization
Autonomy
the freedom for managers at higher levels of the organization to make
decisions.
Centralization
Decentralization
Autonomy
maximum constraints and minimum freedom
for managers at the lowest levels of an organization to make decisions.
total Centralization
total Decentralization
four types of responsibility
centers NOT inchlude:
cost center
revenue center
finance center
profit center
investment center
four types of responsibility
centers NOT inchlude:
cost center
revenue center
finance center
profit center
investment center
Useful when market prices are unavailable, inappropriate, or too
costly to obtain
Hybrid transfer prices
Market-Based Transfer Prices
Cost-Based Transfer Prices
Perhaps should not be used if the market is currently in a state of “distress pricing.”
Hybrid transfer prices
Market-Based Transfer Prices
Cost-Based Transfer Prices
Prorating the difference between the maximum and minimum
cost-based transfer prices.
Hybrid transfer prices
Market-Based Transfer Prices
Cost-Based Transfer Prices
One of the conditions for market-based transfer prices
Useful when market prices are unavailable, inappropriate, or too
costly to obtain
Interdependencies of subunits are minimal.
The market for the intermediate product is perfectly
competitive.
Perhaps should not be used if the market is currently in a state of “distress pricing.
which method preserves subunit autonony
market-based
cost-based
Allows a firm to achieve goal congruence, motivating management effort, subunit
performance evaluations, and subunit autonomy.
market-based
cost-based
Types of hybrid transfer prices:
Negotiated pricing
Prorating the difference between maximum and minimum
transfer prices
life-cycle costs
Dual pricing
full costs
Biggest drawback to international decentralization
lack of control
uncertainties individual environment
Results in duplication of output
Results in duplication of activities
The greater the freedom, the ...........
the autonomy
lower
greater
