Daniel Trumpe Has Computed the EOQ for a Product He

question 40

Multiple Choice

Daniel Trumpe has computed the EOQ for a product he sells to be 400 units.However,due to recent events he has a cash flow problem.Therefore,he orders only 100 units each time he places an order.Which of the following is true for this situation?

• A)Annual ordering cost will be lower than annual holding cost.
• B)Annual ordering cost will be higher than annual holding cost.
• C)Annual ordering cost will equal annual holding cost.
• D)Annual ordering cost will be unaffected by the order policy change.
• E)Nothing can be determined without more information.

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Definitions:

Cost Of Production Report

A document that details the total cost and production information for a specific period, used primarily in process costing settings.

Equivalent Units

A concept in costing used to convert partially completed goods into the equivalent of a number of fully completed units.

Process Cost Accounting

Process cost accounting is a method used to allocate production costs to units of output in continuous or repetitive manufacturing processes.

Materials Account

The materials account is used in accounting to track the cost of raw materials that are either in stock or used during the manufacturing process.