Question :
Multiple Choice Questions
30. Which of the following statements not true? A. Optimal inventory : 1284434
Multiple Choice Questions
30. Which of the following statements is not true?
A. Optimal inventory levels involve a trade-off between carrying costs and order costs.
B. Carrying costs include the cost of storing goods as well as the cost of capital tied up in inventory.
C. Inventory levels will be lower when storage or interest costs are high and will be higher when restocking costs are high.
D. Inventory level does not rise in direct proportion to sales. As sales increase, the optimal inventory level rises, but more than proportionately.
31. The economic order quantity:
A. is the order size that minimizes the costs of orders.
B. is independent of forecast sales.
C. is a simplified, and even simplistic, version of the real process.
D. increases as cost per order decreases.
32. Which firm will benefit the most from a lock-box service?
A. A firm that has a large number of suppliers
B. A firm that writes a large number of checks daily
C. A firm that has a geographically dispersed customer base
D. A firm that sells goods to a very few customers
33. A firm that is located in New York receives on the average 2,000 checks a day from its customers in the Twin Cities area. Average payment per check is $1,500. A bank in the Twin Cities is offering a lock-box arrangement for collection and processing of these checks at a cost of $0.50 per check. This arrangement will reduce the float by 2 days. The daily interest rate for the firm is 0.02%. What is the net saving from the lock-box arrangement?
A. $200
B. $400
C. $1,000
D. $1,200
34. Which of the following terms of sale is the most restrictive?
A. Net 30
B. Seasonal dating
C. CBD
D. COD
35. At what point does a customer’s unpaid account become delinquent when the terms of sale are 2/10, net 60?
A. 11 days after the sale
B. 31 days after the sale
C. 61 days after the sale
D. 71 days after the sale
36. Which statement is true about terms of trade credit of 2/10, net 30?
A. A 10% cash discount is offered for payment before 30 days.
B. A 2% cash discount can be taken for payment before the 10th of the following month.
C. A 10% cash discount can be taken if paid by the second day after invoicing.
D. No cash discount is offered after the eleventh day.
37. An East Coast firm should establish a lock-box service on the West Coast:
A. if the firm has a large number of customers.
B. if it has banking facilities in West Coast.
C. if West Coast customers are currently mailing their checks to an East Coast address.
D. if West Coast banks are more efficient.
38. With terms of 4/15, net 60, what is the implied interest rate for forgoing a cash discount and paying at the end of the period?
A. 25.63%
B. 28.19%
C. 39.25%
D. 61.15%
39. What happens to the implied interest rate on trade credit as the time interval between the discount period and payment period is decreased?
A. The rate declines.
B. The rate increases.
C. The rate remains constant.
D. It is impossible to predict without knowing length of discount period.
