FMarston,Inc

question 33

Multiple Choice

F.Marston,Inc.has developed a forecasting model to estimate its AFN for the upcoming year.All else being equal,which of the following factors is most likely to lead to an increase of the additional funds needed (AFN) ?

• A) A switch to a just-in-time inventory system and outsourcing production.
• B) The company reduces its dividend payout ratio.
• C) The company switches its materials purchases to a supplier that sells on terms of 1/5, net 90, from a supplier whose terms are 3/15, net 35.
• D) The company discovers that it has excess capacity in its fixed assets.
• E) A sharp increase in its forecasted sales.

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Definitions:

Finished Goods Inventory

The stock of completed products that are ready to be sold but have not yet been sold.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, based on estimated costs and activity levels.

Applied Overhead

Costs related to production that are not directly tied to a specific product but allocated based on a formula or measure.

Machine Hours

A measure of the actual operating time of a machine or piece of equipment, used for costing and manufacturing planning purposes.