Question 1

A board game sells for $29.99. Leo's Games consistently sells 3,500 units of this game year after year. The ﬁxed cost to place an order is $52 and the carrying cost per game is $.80. What is the
Economic order quantity?

Accepted Answer

The answer of A board game sells for $29.99. Leo's...

Question 2

ABC Co. is considering granting credit to a new corporate customer. ABC is concerned about the new customer's credit history. ABC would likely ﬁnd each of the following useful EXCEPT
________________.

Accepted Answer

While an aging of ABC's receivables would be useful in determining the creditworthiness of the new customer, it is not as relevant or reliable as the other options given. The most important sources of credit information would be the customer's financial statements, a Dun & Bradstreet report, a credited report, and a credit report from the customer's bank.

Question 3

Stamford, Inc. currently sells 8,350 units a month for total monthly sales of $179,500. The company is considering replacing its current cash only credit policy with a net 30 policy. The variable cost per
Unit is $6.23 and the monthly interest rate is 2 percent. What is the switch break-even level of
Sales?

Accepted Answer

The answer of Stamford, Inc. currently sells 8,350 units a...

Question 4

You currently sell a product with a variable cost per unit of $43 and a unit selling price of $69. At the present time you only sell on a cash basis and have monthly sales of 680 units. The monthly
Interest rate is .75 percent. You are considering switching to a net 30 credit policy. What is the
Switch break-even point?

Accepted Answer

The switch break-even point is calculated by finding the additional units needed to cover the cost of offering credit. The contribution margin per unit is $69 - $43 = $26. The interest cost per unit is $69 * 0.0075 = $0.5175. The break-even point is 680 + (680 * $0.5175 / $26) = 694 units.

Question 5

Which one of the following is the most effective means of determining which customer accounts are delinquent and require immediate attention?

Accepted Answer

An aging schedule of accounts receivable is the best choice for determining which customer accounts are delinquent and require immediate attention. This schedule categorizes accounts by the length of time since the invoice was issued, allowing for a clear indication of overdue accounts.

Question 6

Which of the following is the best deﬁnition of a terms of sale.

Accepted Answer

A terms of sale refers to the conditions on which a firm sells its goods and services, including the terms of payment, delivery, and other contractual obligations. Option A refers to an aging report, option B refers to a subsidiary company, option C refers to a cash discount, and option D refers to the collection procedures for accounts receivable - none of which defines a terms of sale. Therefore, E is the correct answer.

Question 7

Karloff Medical Supply maintains an average inventory of 2,000 human skulls for sale to medical schools and ﬁlmmakers. The carrying cost per skull per year is estimated to be $5. Boris places an
Order for 10,000 skulls on the ﬁrst of each month and the order cost is $75. What is the average
Inventory using the EOQ?

Accepted Answer

The answer of Karloff Medical Supply maintains an average inventory...

Question 8

Which one of the following statements is correct?

Accepted Answer

It is recommended to limit the amount of initial credit purchase for new customers as it minimizes the risk of default and helps establish their creditworthiness before extending more credit. A) is incorrect as repeat customers may still default on payments. B) is incorrect as past payment history is often indicative of future payment behavior. D) is incorrect as existing customers may have an established payment history to analyze. E) is incorrect as it may lead to overspending and increase the risk of default.

Question 9

Which one of the following will increase the average balance in accounts receivable?

Accepted Answer

An increase in the sales amount per customer will result in higher amounts in accounts receivable, therefore increasing the average balance.

Question 10

Inventory needs under a derived-demand inventory system are:

Accepted Answer

Derived-demand inventory is based on the anticipated level of finished goods inventory. It is the inventory of raw materials or components required to meet the production requirements of a firm. The inventory level is determined by the production schedule to achieve the desired level of finished goods inventory. A derived-demand inventory system is not primarily dependent upon the competitive demands placed on a firm's suppliers, as mentioned in option A. Minimizing the cost of restocking inventory is an objective of inventory management, but it is not a characteristic of a derived-demand inventory system. Option D is also incorrect, as inventory needs can change over time. While a kanban system can be used as a tool for managing inventory, it is not a defining characteristic of a derived-demand inventory system.

Question 11

Which of the following is the best deﬁnition of a collection policy.

Accepted Answer

The answer of Which of the following is the best...

Question 12

Which of the following is considered a carrying cost associated with granting credit?

Accepted Answer

The answer of Which of the following is considered a...

Question 13

Which of the following is the best deﬁnition of a cash discount.

Accepted Answer

The answer of Which of the following is the best...

Question 14

Which of the following is the best deﬁnition of an aging schedule.

Accepted Answer

The answer of Which of the following is the best...

Question 15

You sell 7,000 units of an item each year. The carrying cost per unit is $1.10 and the ﬁxed costs per order are $75. What is the economic order quantity?

Accepted Answer

The answer of You sell 7,000 units of an item...

Question 16

Which of the following statements is false?

Accepted Answer

The answer of Which of the following statements is false?
...

Question 17

Which of the following is the best deﬁnition of a captive ﬁnance company.

Accepted Answer

The answer of Which of the following is the best...

Question 18

Which one of the following statements correctly describes a credit instrument?

Accepted Answer

The answer of Which one of the following statements correctly...

Question 19

A ________________ is an instrument that is due and payable immediately upon receipt.

Accepted Answer

The answer of A ________________ is an instrument that is...

Question 20

Your current sales consist of 40 units per month at a price of $125 a unit. You are weighing the pros and cons of switching to a net 30 credit policy from your current cash only policy. If you decide to
Switch your credit policy you also plan to increase the sales price to $139 a unit. The monthly
Interest rate is 1.5 percent. What is the break-even default rate of the proposed switch?

Accepted Answer

The answer of Your current sales consist of 40 units...

Quiz 20: Credit and Inventory Management

A board game sells for $29.99. Leo's Games consistently sells 3,500 units of this game year after year. The ﬁxed cost to place an order is $52 and the carrying cost per game is $.80. What is the Economic order quantity?

ABC Co. is considering granting credit to a new corporate customer. ABC is concerned about the new customer's credit history. ABC would likely ﬁnd each of the following useful EXCEPT ________________.

Which one of the following is the most effective means of determining which customer accounts are delinquent and require immediate attention?

Which of the following is the best deﬁnition of a terms of sale.

Which one of the following statements is correct?

Which one of the following will increase the average balance in accounts receivable?

Inventory needs under a derived-demand inventory system are:

Which of the following is the best deﬁnition of a collection policy.

Which of the following is considered a carrying cost associated with granting credit?

Which of the following is the best deﬁnition of a cash discount.

Which of the following is the best deﬁnition of an aging schedule.

You sell 7,000 units of an item each year. The carrying cost per unit is $1.10 and the ﬁxed costs per order are $75. What is the economic order quantity?

Which of the following statements is false?

Which of the following is the best deﬁnition of a captive ﬁnance company.

Which one of the following statements correctly describes a credit instrument?

A ________________ is an instrument that is due and payable immediately upon receipt.