The ABC firm is using a continuous inventory quantity system and is currently ordering 300 units every time an order is placed. Their annual order costs are $200 and their annual carrying costs are $300. To minimize their total annual inventory costs the firm should reduce the order quantity so that it is less than 300 units increase the order quantity so that it is greater than 300 units leave the order quantity at 300 units since it is the optimal order quantity use a periodic inventory system to reduce costs cannot be answered because of insufficient information
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
The ABC firm is using a continuous inventory quantity system and is currently ordering 300 units every time an order is placed. Their annual order costs are $200 and their annual carrying costs are $300. To minimize their total annual inventory costs the firm should
- reduce the order quantity so that it is less than 300 units
- increase the order quantity so that it is greater than 300 units
- leave the order quantity at 300 units since it is the optimal order quantity
- use a periodic inventory system to reduce costs
- cannot be answered because of insufficient information
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