Based on the Constant Demand Assumption in the Economic Order

question 12

Multiple Choice

Based on the constant demand assumption in the economic order quantity (EOQ) model, the average cycle inventory is:

• A) the order quantity divided by the number of inventory cycles per year.
• B) the annual demand divided by the number of inventory cycles per year.
• C) half of the order quantity.
• D) half of the annual usage.

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Definitions:

Capital in Excess

Funds that exceed the par value of issued stock, often referred to as additional paid-in capital or share premium.

U.S.GAAP

United States Generally Accepted Accounting Principles, a collection of rules and guidelines designed to improve and standardize accounting practices.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired and put into use.

Balance Sheet

A financial statement that provides a snapshot of a company’s financial condition at a specific time, including assets, liabilities, and shareholders' equity.