a)
To determine: The definition of Baumol model.
a)
Explanation of Solution
The Baumol show could be a demonstration for building up the firm's target cash adjust that closely takes after the EOQ show utilized for stock. The demonstrate accept (1) that the firm employs cash at a relentless, unsurprising rate, (2) that the firm's
b)
To determine: The definition of total carrying cost, total ordering cost, and total inventory cost.
b)
Explanation of Solution
Carrying costs are the expense of carrying stock. Ordering costs are the costs of requesting stock. Total inventory costs are the entirety of ordering and carrying costs.
c)
To determine: The definition of EOQ, EOQ model, and EOQ range.
c)
Explanation of Solution
The Economic Ordering Quantity (EOQ) is the arrange amount that minimizes the costs of requesting and carrying inventories. The EOQ model is the condition utilized to discover the EOQ. The range around the ideal requesting amount which will be requested without essentially influencing add up to stock costs is the EOQ range.
d)
To determine: The definition of reorder point and safety stock.
d)
Explanation of Solution
The reorder point is the stock level at which a unused arrange is put. Safety stock is stock held to watch against larger-than-normal deals and/or shipping delays.
e)
To determine: The definition of red-line method, two-bin method, computerized inventory control system.
e)
Explanation of Solution
The red line strategy could be a strategy for stock control, as is the two-bin strategy. Computerized inventory
f)
To determine: The definition of just-in-time system and outsourcing.
f)
Explanation of Solution
JIT frameworks allude to getting inventories fair as they are required. Firms that utilize such frameworks are endeavoring to play down stock carrying costs. Out-sourcing is the practice of obtaining components instead of making them in-house.
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Chapter 23 Solutions
Intermediate Financial Management (MindTap Course List)
- Which of the following describes the economic order quantity (EOQ)? a. It is associated with a pull inventory system. b. It is the heart of a JIT purchasing system. c. It minimizes total ordering and carrying costs. d. It minimizes stock-out costs.arrow_forwardWrite out the formula for the total costs of carrying and ordering inventory, and then use the formula to derive the EOQ model.arrow_forwardWhen inventory items are highly specialized, the best inventory costing method is ________. A. specific identification B. first-in, first-out C. last-in, first-out D. weighted averagearrow_forward
- A JIT inventory management system maintains which of the following? a. Goods should be pushed through the system on a fixed schedule based on anticipated demand. b. Goods should be pulled through the system by present demand. c. Total inventory costs are minimized by balancing setup and carrying costs. d. Inventories are needed to avoid stock-out costs.arrow_forwardWhich of the following is an advantage of the periodic inventory system? A. frequent physical inventory counts B. cost prohibitive C. time consuming D. real-time information for managersarrow_forwardDescribe costing inventory using weighted average. Address the different treatment, if any, that must be given for periodic and perpetual inventory updating.arrow_forward
- Answer 2nd picture: Inventory costing: perpetual systemarrow_forwardCost accounting systems used by manufacturing companies are based on the: A. LIFO inventory system. B. Perpetual inventory system. C. Finished goods inventories. D. Weighted average inventories. E. Periodic inventory system. Reset Selectionarrow_forwardDefine Inventory Turnover? Explain what the results mean and provide an example.arrow_forward
- When inventory items are highly specialized, the best inventory costing method is ________.A. specific identificationB. first-in, first-outC. last-in, first-outD. weighted averagearrow_forwardDefine each of the following terms: e. Red-line method; two-bin method; computerized inventory controlsystemarrow_forwardWhich one of the following groups of items best identifies various types of inventory opportunity costs? Multiple Choice Inventory obsolescence, warehouse rent, opportunity cost of capital utilized, insurance premium on inventory. Insurance premium on inventory, cost of equipment setup for production run, cost of inventory clerk, inventory theft. Warehouse rent, insurance premium, inventory obsolescence, reorder costs. Cost of inventory tracking system, cost of forklift driver to move inventory, cost of accounts payable clerk to process bills from suppliers, insurance premium on inventory Cost of inventory clerk, cost of forklift driver to move inventory, cost of clerk to reorder inventory, cost of machine operator to set up a production run. 2. Quidi Vidi Co. has 325 motors in its inventory at the start of the week. It will use all of these in its weekly production runs and then resupply its inventory for the next week. The carrying cost per motor is $84.26. The fixed…arrow_forward
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