Which One of the Following Statements About MRP Is Best

question 39

Multiple Choice

Which one of the following statements about MRP is best?

• A) MRP uses a level-by-level processing procedure; the component items are processed first.
• B) An action notice should be issued if the scheduled receipt in a period is less than the projected on-hand inventory for that period.
• C) The periodic order quantity rule introduces remnants that are used as a buffer against uncertainties.
• D) The fixed order quantity rule results in remnants.

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Definitions:

Fixed Factory Overhead

Indirect manufacturing costs that remain constant regardless of the level of production, such as rent, insurance, and salaries of certain managers.

Variable Costing

An accounting method in which costs vary in proportion to the volume of output; this includes direct materials, direct labor, and variable manufacturing overhead.

Operating Income

The profit realized from a business's core operations, excluding expenses related to financing and investments.

Absorption Costing

An accounting method that includes all manufacturing costs (direct and indirect) in the cost of a product.