The Economic Order Quantity

question 24

Multiple Choice

The economic order quantity

• A) determines the reorder point.
• B) provides the lowest inventory costs.
• C) determines the safety stock.
• D) all of these.

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Definitions:

Standard Cost System

An accounting method where costs are predetermined for product costing, facilitating variance analysis between expected and actual costs.

Fixed Manufacturing Overhead

Indirect costs associated with manufacturing that do not vary with the level of production, such as salaries of managers and depreciation of factory equipment.

Variances

The difference between expected and actual figures in budgeting and financial forecasting.

Direct Labor-Hours

The complete count of hours expended by personnel directly part of the process in making a product or providing a service.