Yates started the year with $8,000$ units in inventory, produced $50,000$ units during the year, and

sold $55,000$ units. The value of ending inventory is

a$.$ greater under variable costing than

absorption costing.

b$.$ greater under absorption costing than

variable costing

c$.$ the same under both variable and

absorption costing.

d$.$ There is no ending imventory.

c$.$ This situation cannot happen.

$8-2$ In a segmented income statement, which of the following statements is true?

a$.$ Segment margin is greater than contribution margin.

b$.$ Common fixed expenses must be allocated to each segment.

c$.$ Contribution margin is equal to sales less all variable and direct fixed expenses of a segment

d$.$ Segment margin is equal to contribution margin less direct and common fixed expenses.

Segment margin is equal to contribution margin less direct fixed expenses.

$8-3$ The EOQ for Part B$-22$ is $2,500$ units, and four orders are placed each year. The total

annual ordering cost is $$1,200.$ Which of the following is true?

a$.$ The cost of placing one order is $$4,800.$

d$.$ The total carrying cost is $$1,200.$

b$.$ The annual demand for the part is $2,500$

units.

c$.$ It is impossible to calculate the annual

carrying cost given the above information.

c$.$ The cost of placing one order is $$1,200.$

$8-4$ Which of the following is a reason for carrying inventory?

a$.$ To balance setup and carrying costs

d$.$ To take advantage of discounts

b$.$ To satisfy customer demand

c$.$ All of these

To avoid shutting down manufacturing facilitics

$8-5$ Suppose that a material has a lead time of three days and that the average usage of the mate$-$

rial is $12$ units per day. What is the reorder point?

a$.3$

b$.12$

$d.36$

$c.45$

$8-6$ Suppose that a material has a lead time of three days and that the average usage of the mate$-$

rial is $12$ units per day. The maximum usage is $15$ units per day. What is the safety stock?

a$.3$

d$.15$

$b.12$

$c.9$

c$.5$

$8-7$ A segment could be which of the following?

a$.$ Product

d$.$ All of these

b$.$ Customer type

c$.$ Geographic region

c$.$ None of these

$8-8$ Garrett Company prowided the following information:

Common fixed cost totaled $$46,000.$ Garrett allocates common fixed cost to Product $1$ and

Product $2$ on the basis of sales. If Product $2$ is dropped, which of the following is true?

a$.$ Sales will increase by $$300,000$

b$.$ Overall operating income will increase by $$2,600$

c$.$ Overall operating income will decrease by $$25,000$

d$.$ Overall operating income will not change.

c$.$ Common fixed cost will decrease by $$27,600.$

$8-9$ Many companies use absorption costing because it

a$.$ accords with GAAP.

d$.$ provides the segment margin.

b$.$ is most useful for management decision

c$.$ None of these.

making.

c$.$ provides the contribution margin.

Use the following information for Multiple$-$Chaice Exercises $8-10$ through $8-12.$

McCartncy Company produces a number of products and provides the following information:

Annual demand for Product $C$

Cost of setting up to make Product $C$

Cost of setting up to make Product $C$ Cost of carrying one unit of Product $C$ in inventory

$20,000$ $$45$ $$5$

Currently, McCartney produces $1,000$ units of Product C per production run.

$8-10$ Refer to the information for McCartney Company above. Inventory$-$related cost for Prod$-$

uct $C$ under the current inventory policy is

a$.$ $$900.$

d$.$ $$45,000$

b$.$ $$2,500.$

c$.$ $$100,000$

$8-11$ Refer to the information for McCartney Company above. The economic order quantity

$($EOQ$)$ for Product $C$ is

a$.500$

d$.800$

b$.600$

c$.1,000$

$8-12$ Refer to the information for McCartney Company above. What is the total inventory

related cost at the EOQ? $($Note: Round the number of setups to the nearest whole number.$)$

a$.$ $$1,500$

d$.$ $$3,400$

b$.$ $$3,330$

c$.$ $$5,000$