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:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate reflection of the costs incurred by products or services.

Plantwide Overhead Rate

A single overhead rate calculated by dividing total indirect costs by total base units, used throughout an entire manufacturing plant.

Manufacturing Overhead

All indirect costs associated with manufacturing, not including direct materials and direct labor.

Plantwide Overhead Rate

A single overhead rate calculated by dividing total factory overhead by a base, used throughout a manufacturing plant for allocating overhead costs to products.