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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?
Suggested Answer: D
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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.
36 comments · newest first
LO
Lonny
10 months ago
I thought safety stock would play a bigger role here.
AL
Alisha
11 months ago
Just to clarify, it's definitely D.
IN
Ines
11 months ago
Wait, isn't that counterintuitive?
NO
Norah
11 months ago
Totally agree, it's all about cost efficiency.
NG
Nguyet
11 months ago
Decreasing carrying costs increases EOQ!
MO
Mollie
12 months ago
I’m leaning towards option D, carrying costs. If they decrease, wouldn’t that mean we need to order more to maintain inventory levels?
JE
Jerry
12 months ago
I feel like safety stock levels don't really impact EOQ directly, but I could be wrong. It’s all a bit confusing.
ME
Merilyn
12 months ago
I remember practicing a similar question where we discussed how carrying costs affect EOQ. I think if carrying costs decrease, EOQ would actually decrease, right?
VA
Van
1 year ago
I think a decrease in annual sales might increase the EOQ, but I'm not entirely sure how that works in practice.
DE
Deeanna
1 year ago
I'm pretty confident the answer is B. The EOQ formula is designed to minimize the total costs of ordering and holding inventory, so a decrease in the cost per order would lead to a higher optimal order quantity.
EL
Elbert
1 year ago
Okay, let me walk through this step-by-step. The EOQ formula is Q = square root of (2*D*S/H), where D is annual demand, S is the cost per order, and H is the holding cost per unit. If S (the cost per order) decreases, then the EOQ would increase. So the answer is B.
SA
Sang
1 year ago
Hmm, I'm not too sure about this one. The EOQ formula has a lot of variables, so I'll need to think through it carefully to figure out which one would increase the EOQ if it decreased.
VI
Vicki
1 year ago
I think the answer is B. A decrease in the cost per order would increase the EOQ, since that's one of the variables in the EOQ formula.
JE
Jenelle
1 year ago
Hmm, I'm a little unsure about this one. I know we covered global display settings in class, but I can't quite remember the specific term they're looking for here. Let me think it through step-by-step.
PE
Pearlene
1 year 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.
WA
Walton
1 year 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.
BE
Beatriz
1 year ago
I see your point, but I still think D is the best choice here. Lower carrying costs have a bigger impact on EOQ.
MA
Magdalene
1 year ago
But what about B - cost per order? Wouldn't a decrease in that also increase the EOQ?
DA
Darrin
1 year ago
I think you're right, D makes sense. Lower carrying costs means ordering more at once.
AL
Allene
1 year ago
Wait, what? This is too much math for me. I'm just going to guess and hope for the best.
JO
Joseph
1 year ago
C, definitely C. Lowering the safety stock level would mean you need to order more, so the EOQ would go up. Easy peasy.
KA
Kate
1 year ago
So, it's a balance between those two variables to optimize the EOQ.
FI
Filiberto
1 year ago
Yes, that's true. Both lowering safety stock level and increasing cost per order would increase the EOQ.
LO
Loren
1 year ago
But wouldn't increasing the cost per order also increase the EOQ?
WI
Willard
1 year ago
I agree, lowering the safety stock level would definitely increase the EOQ.
VA
Vallie
1 year 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!
LO
Lore
1 year ago
I agree, it's interesting how small changes in variables can have a big impact on the EOQ.
LE
Leah
1 year ago
Yeah, that makes sense. It's all about finding that balance in inventory management.
MI
Michal
1 year ago
I think you're right, a decrease in the cost per order would definitely increase the EOQ.
OW
Owen
1 year ago
Hmm, a decrease in carrying costs seems like the obvious answer here. The EOQ formula is all about balancing ordering and holding costs.
CH
Chauncey
1 year ago
C: So, if carrying costs go down, the EOQ would go up to compensate for that change.
PA
Pansy
1 year ago
B: Yeah, that makes sense. The EOQ model is all about finding that balance between ordering and holding costs.
FR
Francene
1 year ago
A: I think a decrease in carrying costs would definitely increase the EOQ.
WI
William
1 year ago
I think a decrease in carrying costs would increase the EOQ because it would make it more expensive to hold inventory.
KA
Kaitlyn
2 years ago
I disagree, I believe a decrease in annual sales would increase the EOQ.
FL
Florinda
2 years ago
I think a decrease in cost per order would increase the EOQ.