Which of the Following Is Not a Key Assumption Underlining

question 8

Multiple Choice

Which of the following is not a key assumption underlining the classic economic order quantity (EOQ) model?

• A)The entire order quantity arrives in the inventory at one time
• B)There are only two types of relevant costs: order/setup and inventory-holding
• C)Demand is assumed to be stochastic
• D)Stockouts are not allowed

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Definitions:

Spending Variance

The difference between the actual amount spent and the budgeted amount for a particular accounting period.

Net Operating Income

The revenue earned from normal business operations after deducting operating expenses but before interest and taxes.

Activity Variance

The difference between the planned activity level of cost-driving activities and the actual level incurred, impacting the budget or costing analysis.

Materials

Items or substances used in the production or manufacturing of goods.