Question 6 of 226

Which of the following is a characteristic of just-in-time inventory management systems?

    Correct Answer: D

    Just-in-time (JIT) inventory management systems are characterized by reliance on high quality materials. This is because JIT aims to reduce inventory costs by having materials arrive only as they are needed in the production process. To avoid disruptions, the materials must be of high quality to minimize defects and ensure smooth production flow. High quality materials are crucial in maintaining the efficiency and reliability of the production process, as there is little room for error or delay in JIT systems.

Question 7 of 226

The economic order quantity for inventory is higher for an organization that has:

    Correct Answer: B

    The Economic Order Quantity (EOQ) formula is designed to minimize the total inventory costs, which comprise ordering costs and carrying costs. If the fixed inventory ordering costs are higher, it makes sense for the organization to order larger quantities to spread out these fixed costs over a larger number of units, thereby reducing the per-unit cost of ordering. This means the EOQ will be higher for organizations with higher fixed inventory ordering costs.

Question 8 of 226

What must be monitored in order to manage risk of consumer product inventory obsolescence?

1. Inventory balances.

2. Market share forecasts.

3. Sales returns.

4. Sales trends.

    Correct Answer: C

    To manage the risk of consumer product inventory obsolescence, both inventory balances and sales trends must be monitored. Inventory balances help track the quantity of products on hand, while sales trends provide insights into how products are selling over time. This combination allows for a comprehensive understanding of product movement and helps identify any products that may become obsolete due to declining sales.

Question 9 of 226

The percentage of sales method, rather than the percentage of receivables method, would be used to estimate uncollectible accounts if an organization seeks to:

    Correct Answer: D

    The percentage of sales method is used to estimate uncollectible accounts as it aligns with the matching principle. The matching principle dictates that expenses should be matched to the revenues they help to generate, which is accomplished by estimating uncollectible accounts as a percentage of sales. This method ensures that bad debt expense is recorded in the same period as the related sales revenue, thereby providing a more accurate measure of profitability for that period.

Question 10 of 226

In an analysis of alternative credit-management policies, which of the following components will cause the net present value of receivables on credit sales to increase, if everything else remains constant?

    Correct Answer: C

    A longer average collection period means that customers are taking more time to pay their invoices. If customers take longer to pay, the receivables will remain on the company's books for a longer period of time, increasing the net present value of those receivables, assuming everything else remains constant.