Posted: April 30th, 2016

What is the impact on the total amount of annual carrying and ordering costs?

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.
d. all of these.

SECTION II

1. The operations of Grant Corporation are divided into the Fix Division and the Roach Division. Projections for the next year are as follows:

Fix Roach
Division Division Total
Sales $60,000 $ 40,000 $100,000
Variable costs 20,000 15,000 35,000
Contribution margin $40,000 $ 25,000 $ 65,000
Direct fixed costs 12,500 30,000 42,500
Segment margin $27,500 $ (5,000) $ 22,500
Allocated common costs 10,000 7,500 17,500
Operating income (loss) $17,500 $(12,500) $ 5,000