The Optimal Cash Replenishment Level Will Decrease with All of the Following

question 63

Multiple Choice

The optimal cash replenishment level will decrease with all of the following changes EXCEPT:

• A)the transaction cost decreases.
• B)the annual demand for cash decreases.
• C)the interest rate decreases.
• D)All of the options will decrease the optimal cash replenishment level.

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Definitions:

Conversion Costs

The total expenses of direct labor together with manufacturing overheads spent in transforming raw materials into completed products.

Process Cost Accounting System

A bookkeeping mechanism for distributing costs among similar items that are produced in large scale and without interruption.

Equivalent Units of Production

A concept in cost accounting used to assign costs to partially completed goods, calculated by taking the number of units in the production process and converting them into a number of completed units.

Conversion Cost

The combined total of labor and manufacturing overhead costs necessary to convert raw materials into finished products.