The Economic Order Quantity Approach States That Inventory Order Sizes

question 2

Multiple Choice

The economic order quantity approach states that inventory order sizes should be determined in which of the following manners?

• A)computing the amount of the derived demand
• B)dividing annual item sales by the carrying cost per item and multiplying by 2
• C)dividing the inventory into various groups based on the value per item
• D)computing the average number of items sold each month
• E)equating restocking costs with carrying costs

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Definitions:

Land Account

An account used in accounting to track the investment in land owned by an entity, including the costs associated with acquiring the land.

Adjustment Necessary

Indicates that changes must be made to financial records or statements to correct inaccuracies or account for new information.

Equipment Account

An account in financial records that tracks the cost and accumulated depreciation of equipment owned by a business.

Unamortized Patent

The portion of a patent's cost that has not yet been expensed through amortization.