Multiple Choice Questions: Accounts

Topics: Costs, Management accounting, Inventory Pages: 19 (5088 words) Published: November 15, 2014
1.Sully Company uses 3,000 yards of canvas each day to make tents. It usually takes ten days from the time Sully orders the material to when it is received. If Sully’s desired safety stock is 12,000 yards, what is Sully’s order point? a.

12,000 yards
b.
21,000 yards
c.
30,000 yards
d.
42,000 yards

ANS:D
3,000 (daily usage) x 10 (lead time)
30,000
Safety stock
12,000
Order point
42,000

PTS:1DIF:ModerateREF:P.OBJ:1
NAT:IMA 3A - Strategic ManagementTOP:AACSB - Analytic

2.What is the objective of the economic order quantity (EOQ) model for inventory? a.
To minimize order costs or carrying costs, whichever are higher b.
To minimize order costs or carrying costs and maximize the rate of inventory turnover c.
To minimize the total order costs and carrying costs over a period of time d.
To order sufficient quantity to economically meet the next period's demand

ANS:C
If the demand for the product can be determined because it is predictable, the essence of any EOQ model for inventory is to minimize the total order costs and also minimize the total carrying costs.

PTS:1DIF:EasyREF:P.OBJ:1
NAT:IMA 3A - Strategic PlanningTOP:AACSB - Analytic
3.Expected annual usage of a particular raw material is 1,200,000 units, and standard order size is 10,000 units. The invoice cost of each unit is $145, and the cost to place one purchase order is $105. The estimated annual order cost is: a.

$12,000.
b.
$17,400.
c.
$12,600.
d.
$800,000.

ANS:C
Annual order cost
=
Number of orders  Per order cost

=
1,200,000 units
 $105

10,000 units

=
120 orders  $105

=
$12,600

PTS:1DIF:ModerateREF:P.OBJ:1
NAT:IMA 3A - Strategic PlanningTOP:AACSB - Analytic

4.The personnel involved in the physical control of materials includes all of the following except the: a.
Purchasing agent.
b.
Receiving clerk.
c.
Cost accountant.
d.
Production department supervisor.

ANS:C
The cost accountant has the responsibility for the accounting records pertaining to inventory valuation but not for the physical materials.

PTS:1DIF:ModerateREF:P.OBJ:2
NAT:IMA 1C - Internal ControlsTOP:AACSB - Reflective

5.Listed below are steps of purchasing and receiving materials:

1. The receiving clerk prepares a receiving report.
2. Purchase requisitions are prepared to notify the purchasing agent that additional materials are needed. 3. The purchase of merchandise is recorded by the accounting department. 4. The purchasing agent completes a purchase order.

In which order would these events typically happen?
a.
4, 2, 3, 1
b.
2, 4, 3, 1
c.
2, 4, 1, 3
d.
4, 2, 1, 3

ANS:C
The storeroom keeper will prepare a purchase requisition to notify the purchasing agent that additional materials are needed. The purchasing agent will then complete a purchase order and send it to the vendor. When the goods are received, the receiving clerk will prepare a receiving report which is compared to the vendor’s invoice and the purchase order. At that time, the accounting department will record the purchase of the inventory items in the general ledger.

PTS:1DIF:ModerateREF:P.OBJ:2
NAT:IMA 2B - Cost ManagementTOP:AACSB - AnalyticTo effectively control materials, a business must maintain:

6.If a company receives a larger quantity of goods than had been ordered and keeps the excess for future use, a(n)______________ is prepared to notify the vendor of the amount of increase to accounts payable in the invoice. a.

credit memorandum
b.
return shipping order
c.
debit memorandum
d.
additional purchase order

ANS:A
A Debit or credit memorandum may be issued when the shipment of materials does not match the purchase order and the invoice. In this case, since more materials than ordered and billed were received, the company would issue...
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