Posted: May 4th, 2016

The economic order quantity is the order quantity that results in?

You have been asked by management to explain the variances in costs under your inpatient capitated contract. The following data is provided.
Budget Actual
Inpatient Costs $12,568,500 $16,618,350
Members 42,000 42,000
Admission Rate 0.The company uses the straight-line method of depreciation with no mid-year convention.

What is the accounting rate of return on original investment rounded to the nearest percent, assuming no taxes are paid?
a. 40%
b. 73%
c. 22%
d. 24%

19. Holloway Company is considering the purchase of a new machine for $40,000. The machine would generate an annual cash flow before depreciation and taxes of $15,647 for four years. At the end of four years, the machine would have no salvage value. The company’s cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate.

What is the accounting rate of return on the original investment in the machine approximated to two decimal points?
a. 14.12%
b. 8.47%
c. 39.12%
d. 16.92%

20. Which of the following methods uses income instead of cash flows?
a. payback
b. accounting rate of return
c. internal rate of return
d. net present value

21. 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. increase
b. no change
c. decrease
d. cannot be determined

22. Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total amount of annual carrying and ordering costs?
a. increase
b. no change
c. decrease
d. cannot be determined

23. The economic order quantity is the order quantity that results in
a. the minimum total annual inventory costs.
b. the maximum total annual inventory costs.
c. no inventory shortages.
d. minimum ordering costs.

24. Strategic objectives of JIT include
a. increasing profits.
b. improving a firm’s competitive position.
c. increasing inventory.
d. both a and b.

25. The objectives of JIT are achieved by
a. controlling costs.
b. improving delivery performance.
c. improving quality.070 0.095
Case Mix Index 0.90 0.85
Cost per Case (CMI = 1.0) $4,750 $4,900

Costs per case increased to $4,900 from a budgeted value of $4,750. This increased actual total costs by what amount?