Which of the Following Is TRUE About the Theory of Constraints

question 95

Multiple Choice

Which of the following is TRUE about the theory of constraints?

• A)TOC recognizes that EOQ is important.
• B)TOC recognizes that lowering inventory decreases carrying costs and thus decreases operating expenses and improves net income.
• C)TOC recognizes that lower inventories mean more defects.
• D)TOC recognizes that lower inventories mean slower response to customers.

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Definitions:

Allowance for Doubtful Accounts

This is a subsidiary asset account created to approximate the amount of accounts receivable that could potentially be non-collectable.

Bad Debts Expense

An expense account reflecting estimated uncollectible amounts from customers for credit sales made in a specific period.

Aging of Accounts Receivable

A process of categorizing accounts receivable according to the length of time an invoice has been outstanding.

Balance Sheet Approach

An approach to international financial management that focuses on maintaining balance sheet integrity by managing assets and liabilities across different currencies.