IMANET Exam CMA Topic 5 Question 97 Discussion

Actual exam question for IMANET's CMA exam

Question #: 97
Topic #: 5

[All CMA Questions]

The Stewart Co. uses the economic order quantity (EOQ) model for inventory management.A decrease in which one of the following variables would increase the EOQ?

AAnnual sales.

BCost per order.

CSafety stock level.

DCarrying costs.

Show Suggested Answer

Suggested Answer: D

A firm enjoys a tax benefit upon recognizing a loss on disposal because the loss reduces book income. The old equipments book value is historical cost ($220,000) minus accumulated depreciation ($208,000).

The tax benefit is the accrual-basis loss on the disposal times the effective tax rate.

by Alonzo at Sep 18, 2024, 02:19 PM

Limited Time Offer

25%

Off

Get Premium CMA Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Pearlene

2 months ago

Hmm, this reminds me of that time I tried to calculate the perfect number of cookies to buy for a party. Spoiler alert: I ended up with way too many.

upvoted 0 times

...

Walton

2 months ago

Alright, time to channel my inner accountant. I'm going with D - a decrease in carrying costs. The lower the holding costs, the more you'll want to order at once.

upvoted 0 times

Beatriz

30 days ago

I see your point, but I still think D is the best choice here. Lower carrying costs have a bigger impact on EOQ.

upvoted 0 times

...

Magdalene

1 months ago

But what about B - cost per order? Wouldn't a decrease in that also increase the EOQ?

upvoted 0 times

...

Darrin

1 months ago

I think you're right, D makes sense. Lower carrying costs means ordering more at once.

upvoted 0 times

...

Allene

2 months ago

Wait, what? This is too much math for me. I'm just going to guess and hope for the best.

upvoted 0 times

...

Joseph

2 months ago

C, definitely C. Lowering the safety stock level would mean you need to order more, so the EOQ would go up. Easy peasy.

upvoted 0 times

Kate

27 days ago

So, it's a balance between those two variables to optimize the EOQ.

upvoted 0 times

...

Filiberto

28 days ago

Yes, that's true. Both lowering safety stock level and increasing cost per order would increase the EOQ.

upvoted 0 times

...

Loren

1 months ago

But wouldn't increasing the cost per order also increase the EOQ?

upvoted 0 times

...

Willard

2 months ago

I agree, lowering the safety stock level would definitely increase the EOQ.

upvoted 0 times

...

Vallie

2 months ago

I'm pretty sure it's B - a decrease in the cost per order would increase the EOQ. Gotta love those inventory management models!

upvoted 0 times

Lore

1 months ago

I agree, it's interesting how small changes in variables can have a big impact on the EOQ.

upvoted 0 times

...

Leah

1 months ago

Yeah, that makes sense. It's all about finding that balance in inventory management.

upvoted 0 times

...

Michal

1 months ago

I think you're right, a decrease in the cost per order would definitely increase the EOQ.

upvoted 0 times

...

Owen

2 months ago

Hmm, a decrease in carrying costs seems like the obvious answer here. The EOQ formula is all about balancing ordering and holding costs.

upvoted 0 times

Chauncey

1 months ago

C: So, if carrying costs go down, the EOQ would go up to compensate for that change.

upvoted 0 times

...

Pansy

1 months ago

B: Yeah, that makes sense. The EOQ model is all about finding that balance between ordering and holding costs.

upvoted 0 times

...

Francene

2 months ago

A: I think a decrease in carrying costs would definitely increase the EOQ.

upvoted 0 times

...

William

3 months ago

I think a decrease in carrying costs would increase the EOQ because it would make it more expensive to hold inventory.

upvoted 0 times

...

Kaitlyn

3 months ago

I disagree, I believe a decrease in annual sales would increase the EOQ.

upvoted 0 times

...

Florinda

3 months ago

I think a decrease in cost per order would increase the EOQ.

upvoted 0 times

...