An Assumption of Economic Order Quantity Is That Demand Is

question 10

Multiple Choice

An assumption of economic order quantity is that demand is steady. A decrease in demand or usage rates will lead to:

• A) inventory shortfalls
• B) excess inventory
• C) efficient level of inventory
• D) change in the kind of inventory held

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Definitions:

Equity Method

An accounting method used to record investments in associate companies where the investor has significant influence but not full control, typically 20%-50% ownership. The investor's share of the investee's net income or loss is reflected in the investor's financial statements.

Net Income

A company's profit after deducting expenses and taxes from revenue.

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Partial Equity Method

An accounting approach where an investor recognizes income from its investment in an associate to the extent of dividends received, differing from the full equity method which recognizes income as it's earned by the associate, regardless of dividends received.