A Manager Is Comparing the Total Maintenance (Preventive Plus Breakdown)cost

question 94

Multiple Choice

A manager is comparing the total maintenance (preventive plus breakdown) cost curves for two scenarios.The graphs have maintenance commitment on the x-axis and costs on the y-axis.Scenario A includes the direct breakdown maintenance costs,while Scenario B includes the "full" (direct and indirect) breakdown maintenance costs.Which of the following should the manager notice when going from Scenario A to Scenario B?

• A)Total cost is decreased.
• B)Optimal point is moved to the left.
• C)Optimal point is moved to the right.
• D)Preventative maintenance cost slope is increased.
• E)None of the above

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Definitions:

FIFO Retail Inventory Method

An inventory costing method that assumes items are sold in the order they were purchased or produced, first-in, first-out, applied specifically to retail inventories.

Cost-to-retail Percentage

Cost-to-retail percentage is a ratio used in retail to convert the ending inventory at retail prices back to a cost basis for financial reporting.

Net Markups

The amount by which the selling price of an item exceeds its cost, after accounting for discounts, allowances, and returns.