When the Carrying Cost of Inventory Is Expressed as a Percentage

question 27

Multiple Choice

When the carrying cost of inventory is expressed as a percentage:

• A)the lower it is,the lower the economic order quantity.
• B)it is usually the same as the borrowing cost of the organization.
• C)it is multiplied by the unit variable manufacturing cost to calculate the per unit carrying cost.
• D)it is multiplied by the total unit cost,including allocated fixed costs,to calculate the per unit carrying cost.
• E)it is multiplied by the labor and material cost to calculate the per unit carrying cost.

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Definitions:

Parent Company

A parent company is a corporation that owns enough voting stock in another corporation (subsidiary) to control its board of directors and therefore its operations and policies.

Subsidiary

A company that is completely or partially owned and wholly controlled by another company, referred to as the parent company.

Voting Stock

Shares that give the shareholder a right to vote on company matters, such as electing the board of directors.

Control

The power to direct the financial and operating policies of a business with a view to gain economic benefits from its activities.