The Simplest Version of the Economic Order Quantity Decision Model

question 82

Multiple Choice

The simplest version of the economic order quantity decision model assumes all of the following EXCEPT

• A)the same fixed quantity is ordered at each reorder point.
• B)demand ordering costs and carrying costs are certain.
• C)purchase order lead time is certain.
• D)no stockouts occur.
• E)purchasing costs per unit depend on the quantity ordered.

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Definitions:

Spot Rate

The current market price used for immediate settlement of a currency, security, or commodity transaction.

Hedge Accounting

An accounting method that modifies the normal treatment of gains and losses from hedging activities so that they are recorded in the same period as the offsetting gains or losses on the hedged item.

Foreign Currency Firm Commitments

Agreements to execute a financial transaction in a foreign currency at a future date, at a predetermined rate or price.

Cash Flow Hedge

A form of hedge accounting that aims to reduce the exposure to variability in cash flows related to a specific risk.