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Related Flashcards
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Cards In This Set
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Expenditure cycle
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A recurring set of business activities and related information processing operations associated with the purchase of and payment for goods and services
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The expenditure cycle focuses on
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The acquisition of raw materials, finished goods, supplies and services
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The primary external exchange of info is with
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Suppliers
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The primary objective in the expenditure cycle is to
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Minimize the total cost of acquiring, maintaining inventories, supplies and the various services the organization needs to function
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Data must be
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Accurate, reliable and timely
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Three basic functions of the AIS in the expenditure cycle
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1. capturing and processing data2.storing and organizing data to support decision making3.providing controls to ensure the reliability of data and the safeguarding of organizational resources
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Three basic business activities in the expenditure cycle
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1. order goods, supplies and services2. receiving and storing goods, supplies and services3. paying for goods, supplies and services
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Activities in the expenditure cycle mirror images of the basic activities performed in the
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Revenue cycle
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The first major business activity in the expenditure cycle
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Order goods
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Key decisions made in ordering goods
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What, when, how much to purchase and which supplier
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Economic order quantity (EOQ)
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The optimal order size so as to minimize the sum of ordering, carrying and stockout costs.
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Ordering costs
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All expenses associated with processing purchase transactions
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Carrying costs
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Costs associated with holding inventory
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Stockout costs
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Costs that result from inventory shortages (lost sales or production delays)
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The EOQ formula is used to calculate
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How much to order
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