Costing - Study Mode

[#251] Relevant incremental costs are added into relevant opportunity cost of capital to calculate
Correct Answer

(B) relevant inventory carrying costs

Explanation

Solution: Relevant incremental costs are added into relevant opportunity cost of capital to calculate relevant inventory carrying costs. Inventory carrying cost is the cost of holding goods in stock. Expressed usually as a percentage of the inventory value and includes cost of capital, warehousing, depreciation, insurance, taxation, obsolescence, and shrinkage.

[#252] If economic order quantity for one year is 15000 packages and demand in units for one year are 1500 units, then number of deliveries in a year will be
Correct Answer

(C) 10

Explanation

Solution: Number of deliveries = Economic order quantity ÷ Demand in units = 15000 ÷ 1500 = 10

[#253] Number of purchase orders for each year is multiplied to relevant ordering cost for each purchase order to calculate
Correct Answer

(C) annual relevant ordering costs

Explanation

Solution: Number of purchase orders for each year is multiplied to relevant ordering cost for each purchase order to calculate annual relevant ordering costs. Ordering costs are the expenses incurred to create and process an order to a supplier.

[#254] Costing system, which omits some of journal entries in accounting system is known as
Correct Answer

(C) back flush costing

Explanation

Solution: Costing system, which omits some of journal entries in accounting system is known as back flush costing. Backflush costing is a product costing system generally used in a just-in-time (JIT) inventory environment.

[#255] Decision model to calculate optimal quantity of inventory to be ordered is called
Correct Answer

(B) economic order quantity

Explanation

Solution: Decision model to calculate optimal quantity of inventory to be ordered is called economic order quantity. Economic Order Quantity (EOQ) is a production formula used to determines the most efficient amount of goods that should be purchased based on ordering and carrying costs.