Page 365 - Accounting Information Systems

336 PART II Transaction Cycles and Business Processes

14. How can a firm control against excessive quanti- 18. Explain why traditional cost allocation methods
ties of raw materials being used in the manufactur- fail in a computer-integrated manufacturing
ing process? environment.
15. What is a value stream map? 19. Explain the concept of a product family and its
16. Discuss the advantages of activity-based costing. relationship to value stream accounting.
17. Discuss the disadvantages of activity-based costing. 20. Explain the relationship between MRP II and ERP.

Multiple-Choice Questions

1. Which of the following is not an advantageous rea- Questions 4 through 6 are based on the diagram
son to reduce inventories? below, which represents the EOQ model.
a. Inventories provide a competitive advantage.
D
b. Inventories can invite overproduction.
F
c. Inventories are expensive to maintain.
d. Inventories may conceal problems.
e. All of these are good reasons to reduce A
inventories.
E C
2. The fundamental EOQ model B
a. provides for fluctuating lead times during reor-
der cycles.
b. is relatively insensitive to errors in demand, 4. Which line segment represents the reorder lead
procurement costs, and carrying costs. time?
c. focuses on the trade-off between production a. AB
costs and carrying costs. b. AE
d. is stochastic in nature. c. AF
e. is best used in conjunction with a periodic in- d. BC
ventory system. e. AC
3. Refer to the equation for the EOQ in the text. 5. Which line segment identifies the quantity of safety
Car Country, a local Ford dealer, sells 1,280 stock maintained?
small SUVs each year. Keeping a car on the lot
a. AB
costs Car Country $200 per month, so the com-
pany prefers to order as few SUVs as is economi- b. AE
cally feasible. However, each time an order is c. AC
placed, the company incurs total costs of $300. d. BC
Of this $300, $240 is fixed and $60 is variable.
e. EF
Determine the company’s economic order
quantity. 6. Which line segment represents the length of
time to consume the total quantity of materials
a. 8
ordered?
b. 16
a. DE
c. 18
b. BC
d. 56
c. AC
e. 62
d. AE
e. AD