SOLVED

1) The following accounts have been selected from a company’s balance sheet with values in 000’s: Accounts payable $205, Inventory $405, Bank Overdraft $143, Land $2,780, Bonds $2,450, and Accounts Receivable $273. What is the amount of working capital available to the company? A) ($75,000) B) $68,000 C) $262,000 D) $330,000 E) $660,000 2) BB’s Basement, a bargain retail outlet, purchases $4,000 of end of line clothing inventory from J&P Manufacturing and is granted credit terms of 45 days. BB sells out the inventory for $6,000 within two weeks. Proceeds from the sale after salaries, rent and other expenses, but before paying off accounts payable, is $4,500. If BB can make 3% per annum on a 30-day Guaranteed Investment Certificate (GIC), how much did BB make on the jeans and on managing its working capital? A) $135 B) $500 C) $511 D) $620 E) $635 3) Which of the following will expand working capital? A) Purchase of inventory for a new store through a bank loan. B) Purchase of plant and equipment by means of a bond issue. C) Collection of accounts receivable. D) Payment of accounts payable with cash. E) Advance payment of three months’ rent with cash. 4) Viceroy Audio Ltd. produces components for car, home and television stereo systems. The average collection period for receivables has been stable at 32 days and year-end Accounts Receivable at $656,000. With the onset of recession, customers have been slower to pay and the collection period has risen to 42 days. If the cost of capital to Viceroy Audio is 7% and sales are unchanged, what would the expansion of Accounts Receivable cost the company in a year? A) $1,845 B) $2,422 C) $14,350 D) $59,040 E) $205,000 5) The average inventory turnover period for Catalina Shoe Stores Ltd. is 26 days against an industry average of 38. Which of the following potential higher costs applies to Catalina? A) Obsolescence. B) Warehousing and storage. C) Product returns. D) Supply scarcity. E) Out of stock. 6) Bowden Building Supply’s opening inventory for the year was $810,000 and ending inventory was $625,000 on sales of $6,650,000 and cost of goods sold of $3,600,000. What was Bowden Building Supply’s Average Inventory Turnover Period? A) 63.4 B) 72.8 C) 82.1 D) 343.0 E) 393.8 7) If a company faces a 60-day lead time on orders of a European faucet with an annual demand of 2,190 units, at what inventory level must it reorder to ensure sufficient supply to satisfy average demand? A) 6 B) 45 C) 60 D) 120 E) 360 8) Which of the following is an advantage of the ABC system of inventory control? A) Recognizes that stock outs on low margin items may be as critical for customers as stock outs on high margin items. B) Prevents high demand items from being out of stock. C) Smoothes demand and, therefore, inventory withdrawal. D) Relates the opportunity costs due to poor inventory management to the cost of inventory control. E) Allows management to focus more equally on higher value inventory as well as on lower value items. 9) What is the Economic Order Quantity (EOQ)? A) The amount that should be ordered to minimize the cost of holding the inventory and the cost of ordering. B) The inventory reorder level that minimizes the total costs of inventory. C) The period of time between orders in days, months and/or quarters, to reduce the inventory holding and ordering costs. D) The total inventory cost considering the value of the purchase, order costs, warehousing costs, and labour costs. E) The cost of an individual order considering the value of the purchase, order costs, warehousing costs, and labour costs. 10) Precision Medical Instruments uses 37,500 3-inch polarized mirrors a year. For each case of 25 mirrors, the inventory holding cost is $13.00.The cost of ordering is $8.40. How often should Precision order mirrors per year? A) 22 B) 34 C) 44 D) 68 E) 77 1