Inventory Valuation Multiple Choice Questions(MCQ) Answer-PDF

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Inventory Valuation Multiple Choice Questions or Stock (MCQ) Answer with PDF

1. An increase in the firm’s receivable turnover ratio means that:
A) it is collecting credit sales more quickly than before.
B) cash sales have decreased.
C) it has initiated more liberal credit terms.
D) inventories have increased.
Ans: A

2. A firm’s inventory turnover (IT) is 8 times on a cost of goods sold (COGS) of $800,000. If the ITchanges to 5 times while the COGS remains the same, a substantial amount of funds is either releasedfrom or additionally invested in inventory. In fact, __________.
A) $160,000 is released
B) $100,000 is additionally invested
C) $60,000 is additionally invested
D) $60,000 is released
Ans: C)

3. Reorder point is divided by number of sold units for per unit of time to calculate
a) relevant carrying cost
b) relevant ordering cost
c) purchase order lease time
d) number of purchase orders
Ans: C

4. Purchase order lead time is multiplied to number of units is sold per unit of time to calculate
a) carrying costs
b) relevant total costs
c) economic order quantity
d) reorder point
Ans: D

5. If purchase order lead time is 35 minutes and number of units sold per time is 400 units, then reorder point will be
a) 14000 units
b) 14500 units
c) 15000 units
d) 15500 units
Ans: A

6. A firm’s inventory turnover (IT) is 5 times on a cost of goods sold (COGS) of $800,000. If the IT isimproved to 8 times while the COGS remains the same, a substantial amount of funds is released fromor additionally invested in inventory. In fact,
A) $160,000 is released
B) $100,000 is additionally invested.
C) $60,000 is additionally invested.
D) $60,000 is released.
Ans: D

7. Ninety-percent of Vogel Bird Seed’s total sales of $600,000 is on credit. If its year-end receivablesturnover is 5, the average collection period (based on a 365-day year) and the year-end receivablesare, respectively:
A) 365 days and $108,000.
B) 73 days and $120,000.
C) 73 days and $108,000.
D) 81 days and $108,000.
Ans: C

8. If EOQ = 360 units, order costs are $5 per order, and carrying costs are $.20 per unit, what is theusage in units?
A) 129,600 units
B) 2,592 units
C) 25,920 units
D) 18,720 units
Ans: B

9. Costs of not carrying enough inventory include:
A) lost sales.
B) customer disappointment.
C) possible worker layoffs.
D) all of these.
Ans: D

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