Chapter 15 pt 2

________ is the series of steps and activities required to complete a process.

A procedure

_____ is an arbitrary, but regular and systematic, method used to take asset value as an expense the purpose of calculating net income or loss.

Depreciation

Which of the following is a statistical technique that determines the size of inventory that a business must hold to minimize total inventory cost?

Economic order quantity

Which of the following statements is true of documenting the operations of your business?

Every business process does not have to be extensively documented.

A process is what a business does when it takes some raw material and converts it into a valuable output. This does not apply to service businesses.

False

For a small business, the amount and type of inventory held for resale is not important because the supply of inventory and demand of customers can be matched at all times

False

If your business is wholesale or retail merchandising, the issues of property, plant, and equipment (PPE) constitute your greatest investments and your greatest costs

False

Which of the following policies is a minimum standard for managing customer credit?

Filing suits and liens against the assets of customers who default on payment

Documenting the operations of your business, you must understand how three items relate to each other. Which of the items below is not one of those three related items?

Property

Which of the following is an advantage to renting capital assets?

Renting usually protects you from unexpected costs of repairs.

Which of the following is not a benefit of correctly documenting your business processes?

The process is self-sufficient and does not require much time to review or update.

All capital assets cause you to incur four costs over time: (1) the cost of acquiring the asset, (2) the cost of owning the asset, (3) the cost of operating the asset, and (4) the cost of disposing of the asset.

True

An arm's length transaction is a business deal where the parties have a prior relation or affiliation, but where the business is conducted as if they were unrelated.

True

One of the policies for managing customer credit requires business owners to maintain constant "aging" of accounts to quickly identify customers who become delinquent.

True

The total cost of keeping inventory is the sum of the cost to buy the inventory, the cost to store, protect, and maintain inventory, and the cost of making an order to purchase inventory

True

When determining the cost of a capital asset, the _______ is the sum of everything that you spend to acquire and prepare the asset for its first productive use.

acquisition cost

A _____ describes the difference between the original acquisition cost of capital assets and the amount of depreciation expense that has been recognized to date.

book value

The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer is termed as _____.

just-in-time inventory

Small businesses use the periodic inventory method because it:

meets the requirements of local and federal taxing agencies.

The practice of acquiring inventory only in response to a completed sale is called a(n) _____.

pull-through system

An ideal situation is where a business receives new inventory just as the last unit of the previous order is sold. However, this rarely occurs because the:

sales volumes are not constant