Question 1

The ___ form of inventory control automatically orders a fixed number of items every time an inventory level falls to a predetermined point.

Accepted Answer

The economic order quantity (EOQ) formula is used to calculate the optimal quantity of goods to order to minimize the total cost of inventory management, including ordering costs and holding costs. The basic EOQ model assumes that demand and lead time are constant, and that orders are received in a single delivery. The fixed order quantity (FOQ) method is a variation of the EOQ model that involves ordering a fixed quantity of items each time the inventory level drops to a certain point, known as the reorder point. This method ensures that inventory is replenished before it runs out, and reduces the risk of stockouts, but also involves higher carrying costs and ordering costs than the EOQ method.

Question 2

Freddie, the CEO of MagTel Inc., found that employees are wasting time on unproductive tasks. To solve this issue, he measured one of his employees' performances and provided regular feedback. This helped the employee to improve his productivity. In doing so, Freddie found that "what gets measured happens." Therefore, in the context of project management and control, he must use ___ as a managerial review tool to improve financial performance and customer satisfaction of his company.

Accepted Answer

Balanced scorecards are a managerial review tool that measures and tracks a company's financial, customer satisfaction, internal processes, and learning and growth performance. It helps in aligning strategy and objectives with the organization's vision and mission. Therefore, it can help Freddie improve his company's financial performance and customer satisfaction by measuring and tracking these key performance indicators.

Question 3

Traxer shoes launches baby shoes at a price of $10 per unit. The fixed costs are $15,000 and variable costs are $5 per unit. What sales volume is required to break even?

Accepted Answer

The break-even point in units can be calculated using the formula: Break-even point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Plugging in the given numbers: $15,000 / ($10 - $5) = $15,000 / $5 = 3000 units.

Question 4

Antonio has been working very hard since the establishment of his retail business. He is not far from the time when his revenues will match his expenses. Which of the following would best represent the time described?

Accepted Answer

The described time is when Antonio's revenues will match his expenses. This is known as the breakeven point, which represents the level of sales where total revenues equal total expenses.

Question 5

A bag manufacturing company proposed a selling price of $80 per bag for their new range of bags. Fixed costs are $10,000 and variable costs are $40 per bag. At this point their breakeven point was 250 units. What will be the breakeven point if the variable costs can be brought down to $30?

Accepted Answer

The break-even point in units can be calculated using the formula: Break-even point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). With the original variable costs at $40, the break-even point was 250 units. If the variable costs are reduced to $30, the new break-even point = $10,000 / ($80 - $30) = $10,000 / $50 = 200 units.

Question 6

Breakeven analysis can be used to ___.

Accepted Answer

Breakeven analysis is a versatile tool used in financial and operational planning. It helps in improving control by identifying the point at which revenues equal costs, examines the impact of cost control measures by showing how changes in costs and volume affect profitability, and allows for experimentation with different "what-if" scenarios to understand potential outcomes under various conditions.

Question 7

Ordering a fixed number of items every time an inventory level falls to a predetermined point is called the ___.

Accepted Answer

This is the definition of the economic order quantity (EOQ) system, which calculates the optimal order size to minimize inventory holding costs and ordering costs. It aims to maintain a consistent inventory level while minimizing total inventory costs. Options A, B, D and E are not the correct terms for this concept.

Question 8

For control purposes, which of the following in not an important financial aspect of organizational performance?

Accepted Answer

The ability to sell shares of a company's stock is not an important financial aspect of organizational performance from a control perspective, as it does not directly relate to the financial health or profitability of the company. The other options are important for controlling organizational performance because they relate to the company's ability to generate cash, earn returns, use resources efficiently, and earn revenues greater than costs.

Question 9

Rex's doughnuts can produce only 100 doughnuts a day. The variable cost incurred per unit is $2 and fixed costs incurred per day is $500. At what price should a doughnut be sold to break even?

Accepted Answer

To break even, total revenue must cover total costs.
Total cost = Fixed cost + Variable cost per unit * Number of units
Total cost = $500 + $2 * 100
Total cost = $700

To cover the total cost, selling price per unit should be:

Selling price per unit = Total cost / Number of units
Selling price per unit = $700 / 100
Selling price per unit = $7

Therefore, the doughnut should be sold at $7 to break even.

Question 10

All of the following are financial performance measure that managers should know except:

Accepted Answer

Projected inventory levels are not a financial performance measure, but rather a supply chain management metric. The other choices (liquidity, leverage, asset management, and profitability) are all important financial performance measures that managers should be aware of.

Question 11

Managers rely on ___ to perform what-if calculations under different projected cost and revenue conditions.

Accepted Answer

Managers rely on breakeven analysis to perform what-if calculations under different projected cost and revenue conditions. Breakeven analysis helps managers determine the level of sales needed to cover all costs and break even.

Question 12

When predicting a company's ability to generate cash in order to meet its bill payments, the ___ ratio needs to be calculated.

Accepted Answer

The liquidity ratio measures a company's ability to pay off its short-term obligations using its current assets such as cash, accounts receivable, and inventory. This ratio is important in predicting a company's ability to generate cash in order to meet its bill payments.

Question 13

Shaun, a production manager at Taxener Inc., receives a complaint from the company's employees that raw materials were being used in an unorganized manner leading to production delays. Which of the following techniques will help Shaun to organize the flow of raw materials for production?

Accepted Answer

Just-in-time scheduling is a technique that involves arranging for materials to arrive precisely when they are needed in the production process. By using this technique, Shaun will be able to optimize inventory levels, eliminate waste, and ensure timely delivery of raw materials. This, in turn, will help him to organize the flow of raw materials and address the production delays. The other options such as breakeven point analysis, business process reengineering, pareto principle, and external control are not directly related to organizing the flow of raw materials for production.

Question 14

When working on a project, which technique can be used to control the activities of what needs to be done, what order they can be done, how long each will take, and how long the whole project is expected to take.

Accepted Answer

Gantt charts are a project management tool that allows for the visualization and tracking of tasks and their interdependencies. They can be used to control the activities of what needs to be done, what order they can be done, how long each task will take, and how long the whole project is expected to take.

Question 15

Scheduling materials to arrive on a timely basis at a workstation or facility in order to reduce costs and improve workflow is known as ___.

Accepted Answer

Just-in-time (JIT) scheduling is a system where materials are scheduled to arrive at a workstation or facility just when they are needed in the production process. This helps to minimize inventory carrying costs and improve workflow by reducing waste and inefficiencies. Management by objectives (MBO), economic order quantity (EOQ), efficient production planning (EPP), and timely inventory control (TIC) are also important concepts in logistics and supply chain management, but they do not specifically relate to scheduling materials on a timely basis.

Question 16

Which of the following is the formula for calculating breakeven point?

Accepted Answer

The formula for calculating breakeven point is Fixed Costs divided by (Price - Variable Costs). This calculation will determine the point at which a company's total revenue equals its total expenses.

Question 17

Bill, a finance manager at Iridium Inc., desires to understand why the company's profitability fell in the past 6 months. He must use ___ to understand this issue.

Accepted Answer

An income statement provides a detailed account of a company's profitability by showing its revenues and expenses over a specific period of time. This would be the best choice for Bill to understand why the company's profitability fell in the past 6 months.

Question 18

According to financial controls, liquidity measures ___.

Accepted Answer

Liquidity measures are financial controls that assess a company's ability to meet short-term obligations, including paying debts and covering operational expenses. It is important for businesses to maintain adequate liquidity to ensure they can continue operating efficiently without having to resort to high-interest loans or lapsed payments. Choices B, C, D, and E are not directly related to liquidity measures.

Question 19

Which of the following statements provides an accurate description of financial ratios?

Accepted Answer

Liquidity ratios indeed use information about current assets and current liabilities to assess a company's ability to meet its short-term obligations. This is a fundamental aspect of financial analysis, helping to determine the financial health of a company in terms of its liquid assets.

Question 20

Financial ratios provide all of the following except:

Accepted Answer

Financial ratios do not provide a calculation of the point at which sales revenues are sufficient to cover costs. This is typically calculated using break-even analysis. Financial ratios do provide a framework for historical comparisons, external benchmarking, a means to set financial targets, and a means to track financial goals.

Quiz 9: Control Processes and Systems