What Is the Average Inventory Level, Based on EOQ, for a Firm

question 63

Multiple Choice

What is the average inventory level, based on EOQ, for a firm that has annual sales of 2,500 units, costs per order of $45, and carrying costs of $5 per unit?

• A)35
• B)75
• C)106
• D)237 EOQ =
• = 212

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Definitions:

Goodwill Impairment

A charge that companies record when the book value of goodwill on their balance sheets exceeds its fair market value, indicating that the asset has lost value.

Depreciation Expense

Depreciation Expense refers to the systematic allocation of the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.

Effective Tax Rate

The average rate at which an individual or corporation is taxed, calculated by dividing the total amount of tax by the taxable income.

Consolidated Balance Sheet

A financial statement that shows the combined assets, liabilities, and equity of a parent company and its subsidiaries.