A Product Whose EOQ Is 40 Units Experiences an Increase

question 157

Multiple Choice

A product whose EOQ is 40 units experiences an increase in ordering cost from $10 per order to $90 per order. The revised EOQ is:

• A) three times as large.
• B) one-third as large.
• C) nine times as large.
• D) one-ninth as large.
• E) cannot be determined

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Definitions:

First-In, First-Out Method

An inventory valuation method where the first items purchased or produced are the first ones sold, affecting the cost of goods sold and ending inventory value.

Equivalent Units

A concept used in process costing that converts partially completed units into a smaller number of fully equivalent completed units.

Conversion Costs

represent the total expenses incurred to convert raw materials into finished products, which typically include labor and overhead costs.

Process Costing

An accounting methodology applied when identical units are mass produced, assigning average costs to each unit, simplifying the costing process.