Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

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Multiple Choice

Which of the following is the correct formula for the annual holding cost in the Economic Order Quantity (EOQ) model?

Annual Holding Cost = \( Q \times S \)

Annual Holding Cost = \( \frac{D}{Q} \times S \)

Annual Holding Cost = \( D \times C \)

Annual Holding Cost = \( \frac{Q}{2} \times H \)

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Verified step by step guidance

Step 1: Understand the Economic Order Quantity (EOQ) model. The EOQ model is used to determine the optimal order quantity that minimizes the total inventory costs, which include ordering costs and holding costs.

Step 2: Define the components of the formula. In the EOQ model, 'Q' represents the order quantity, 'H' represents the holding cost per unit per year, and 'D' represents the annual demand.

Step 3: Recall the formula for annual holding cost. The annual holding cost is calculated based on the average inventory level, which is half of the order quantity (since inventory is replenished periodically). The formula is: Annual Holding Cost = \( \frac{Q}{2} \times H \).

Step 4: Compare the given options. Analyze each option provided in the problem and identify which one matches the correct formula for annual holding cost in the EOQ model.

Step 5: Confirm the correct formula. The correct formula is \( \frac{Q}{2} \times H \), as it accurately represents the annual holding cost based on average inventory and holding cost per unit.