Chapter 15: Assets: Inventory and Operations Management

is the process of transforming materials, labor, and energy into goods or services.

Operations

______ inventory is the process of physically counting business assets on a set schedule.

Periodic

___ stock is an amount of inventory carried to ensure that the business will not run out of inventory due to fluctuating sales levels.

Safety

Which of the following are disadvantages of renting an asset when compared with buying the asset? (Check all that apply.)Which of the following are disadvantages of renting an asset when compared with buying the asset? (Check all that apply.)

The asset cannot be used as collateral to obtain borrowed funds. The value of the asset does not show up on a firm's balance sheet.

______ are money that is owed to the business by customers who purchased products or services on credit.

Accounts receivable

Which of the following statements regarding feedback are correct? (Check all that apply.)

All control systems must have feedback. If there is a variation between the output and the standard action, management action must be undertaken to correct the situation. All inputs, materials, and labor must be compared to a predetermined standard.

Informational feedback

It involves data about the processes of the business.

In the context of financial ratios for comparing investment alternatives, identify a true statement about rate of return on investment (ROI).

It is a measure of the connection between an initial investment and the profits that are expected to be obtained from making the investment.

Which of the following statements are true of economic order quantity (EOQ)? (Check all that apply.)

It is the quantity of inventory at which the final cost of inventory is minimized. It helps business owners know the amount of inventory to order.

stock is an amount of inventory carried to ensure that the business will not run out of inventory due to fluctuating sales levels.

Safety

Identify a simple rule that a business should follow to get the greatest benefit from outsourcing.

Completely specify tasks that are to be outsourced.

Which of the following statements regarding quality are correct? (Check all that apply.)

It is a way to improve productivity.. It is a product's or service's fitness for use It is measured by characteristics like durability, reliability, and dependability.

Which of the following describes the equation for productivity?

Outputs/Inputs

______ is contracting with people or companies outside your business to do work for a particular business.

Outsourcing

The net amount realized after subtracting the costs of getting rid of an asset from its selling price is called ______ value.

disposal

Efficiency means doing the same with

less

The business activities necessary to convert inputs into desired outputs is known as a

process

______ is the comparison of productivity ratios to see the extent that an organization has generated more outputs with fewer inputs.

Efficiency

Which of the following are the costs incurred with all capital assets over time? (Check all that apply.)

The acquisition cost of the asset The cost of operating the asset The cost of owning the asset

Identify a cost incurred with all capital assets over time.

The cost of disposing of the asset

True or false: Few small businesses provide credit directly to customers.

True

The total cost of obtaining an asset, including purchase price, transportation, and installation in order to ready it for its first productive use is called the Blank______ cost.

acquisition

The total cost of obtaining an asset, including purchase price, transportation, and installation in order to ready it for its first productive use is called the

acqusiition

______ are assets that are expected to provide economic benefits for periods of time greater than one year.

Capital assets

______ lease is a long-term rental in which ownership of the asset never passes to the person paying the lease.

Operating

Which of the following statements regarding capital assets are correct? (Check all that apply.)

The value that these assets bring to the business is often more than if they were sold. Land, buildings, and machinery are examples of capital assets. Most small businesses have few capital assets.

A(n) ______ is a lease in which at the end of the lease period the asset becomes the property of the lessee, possibly with an additional payment.

capital lease

Which of the following statements regarding outsourcing are correct? (Check all that apply.)

Technology has made outsourcing available. Today, companies outsource to other local companies that have expertise in a specific area. Out sourcing does not necessarily require dealing with foreign firms.

______ is the ratio measure of how well a firm does in using its inputs to create outputs.

Productivity

Disposal value is the

net amount realized after subtracting the costs of getting rid of an asset from its selling price.

Identify the types of feedback on which the operations control of a business depends. (Check all that apply.)

Informational feedback Corrective feedback Reinforcing feedback

Which of the following statements regarding operations are correct? (Check all that apply.)

Operations may include designing, fabricating, and assembling. All businesses have some type of operations. It converts inputs into outputs.

______ is giving a third party legal rights to debts owed to a business in order to provide assurance that borrowed money will be repaid.

Pledging receivables

Which of the following is a disadvantage of offering credit to customers? (Check all that apply.)

Providing credit delays the receipt of cash. Often businesses will have to borrow to replace the missing cash. Sooner or later a customer will not pay his or her bill.

Which of the following is considered an acquisition cost for a new piece of equipment? (Check all that apply.)

Purchase price Installation Transportation

______ is a product's or service's fitness for use, measured as durability, reliability, serviceability, style, ease of use, and dependability.

Quality

Capital leases are

leases in which at the end of the period the asset becomes the property of the lessee, possibly with an additional payment.

A supply chain is:

the line of distribution of a product from its start as materials outside the firm to its handling by sellers into the hands of customers.

The cost incurred to substitute one asset with an identical asset is called ______ value.

replacement

Book value is the

difference between the original cost of an asset and the total amount of depreciation expense that has been recognized to date.

Reinforcing feedback

It awards effective methods and desired employee behaviors in the business.

Corrective feedback

It comprises a value judgment about behaviors and processes of the business.

In the context of financial ratios for comparing investment alternatives, the primary advantage to using the payback period analysis is

its simplicity of use

______ is typically used by Internet firms where inventory is only purchased after a sale is made.

Microinventory

______ value is the price at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction.

Fair market

Which of the following statements about capital budgeting are correct? (Check all that apply.)

It answers the question, "Which of the available investment alternatives provides the greatest benefit relative to the cost of the investment?" Its goal is to improve the quality of decisions about how to best use a business' scarce resources. It works by determining the costs and benefits of each alternative investment.

Which of the following is an advantage of offering credit to customers?

It increases sales because people who buy on credit tend to buy more. Increased sales result in increased profit even though giving credit raises some costs. It increases repeat business. It reduces the cost of selling, because it is much less expensive to obtain repeat business than it is to get new customers.

______ is the activity identified by authoritative bodies as examples of optimal ways to get things done in a particular industry, profession, or trade.

best practice

Capital budgeting is

the process of deciding among various investment opportunities to create a specific spending plan.

Which of the following statements regarding just-in-time (JIT) inventory management are correct? (Check all that apply.)

Raw materials, work in process, and finished goods are all kept at the minimum levels possible. It ships product to the customer immediately upon completion. It is the ultimate extension of pull-through processing. it assembles product in the absolute minimum time possible. It accepts inventory as it is sold.

Which of the following statements regarding periodic inventory are correct? (Check all that apply.)

The time between counts is usually one year, but some businesses conducted them more often. It is the process of physically counting business assets. It meets the requirements of both local and federal taxing agencie

Which of the following statements are the rules for benefiting from outsourcing? (Check all that apply.)

Know yourself and outsource what the business cannot do well. Know who the contractor is, since choosing a competent contract is key to success. Keep strategy decisions in-house, since others will not be as knowledgeable about oneself or customers.

Which of the following are advantages of renting an asset when compared with buying the asset? (Check all that apply.)

A business may be able to return a rented property, thus avoiding future rent payments. The timing and amount of cash outflows is specified in the rental contract.

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

Depreciation

Which of the following is a statistical technique that determines the amount of inventory that a business must possess to reduce total inventory cost?

Economic order quantity

is the process of communicating within or to the organization about how the outputs worked or were received.

Feedback

Which of the following statements is true of the process of pledging receivables? (Check all that apply.)

In this process, a business is liable solely for the amount borrowed and accrued interest on the loan. It is usually less expensive than factoring. It involves using receivables of a business as collateral for loan.

Disposal value is tWhich of the following statements about capital budgeting are correct? (Check all that apply.)he

It answers the question, "Which of the available investment alternatives provides the greatest benefit relative to the cost of the investment?" It works by determining the costs and benefits of each alternative investment. Its goal is to improve the quality of decisions about how to best use a business' scarce resources.

Identify correct statements about depreciation. (Check all that apply.)

It is arbitrary. It is based on the assumption that an asset has a fixed, determinable value that will exist when the depreciation process is complete. It assumes that the value of the asset will decline in a continuous and predictable manner over the period of utility. It is based on the assumption that an asset has a fixed, determinable period of utility.

Which of the following statements regarding safety stock are correct? (Check all that apply.)

It provides a cushion when sales are greater than forecast or when deliveries are delayed. Having too little stock is often worse than having too much. Most managers use a rule of thumb developed from experience to decide on safety stock levels.

In the context of financial ratios for comparing investment alternatives, which of the following is the formula to calculate the rate of return on investment (ROI)?

ROI = (average annual profits)/(average investment)

Which of the following are disadvantages of renting an asset when compared with buying the asset? (Check all that apply.)

The value of the asset does not show up on a firm's balance sheet. The asset cannot be used as collateral to obtain borrowed funds.

Which of the following statements regarding operating leases are correct? (Check all that apply.)

These are similar to renting. At the end of the lease period the lessee either returns the asset or purchases it at the asset's fair market value. Ownership of the asset never passes to the lessee.

The difference between the original cost of an asset and the total amount of depreciation expense that has been recognized to date is called

book value

Replacement value is the

cost incurred to substitute one asset with an identical asset.

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

just-in-time inventory

In the context of financial ratios for comparing investment alternatives, the quantity of time it takes a business to regain the funds it paid out to acquire a capital asset is referred to as

payback period

Fair market value is the

price at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction.

A ______ is the line of distribution of a product from its start as materials outside the firm to its handling, to its handling by sellers into the hands of customers.

supply chain

Microinventory is

used by Internet firms where inventory is only purchased after a sale is made.