MATS Lesson 2 - Materials

The salary of a production manager is a type of:

• Fixed cost

• Variable cost

• Semi-variable cost

A production worker is paid a fixed salary of £1,000 per month and £2 production based bonus per item (depending on output). This type of cost is a:

• Fixed cost

• Variable cost

• Semi-variable cost

The following information is available for a material:

Annual demand: 72,000kg

Annual holding cost per kg: £2

Fixed ordering cost: £20

Calculate the Economic Order Quantity (EOQ) for the material

• 849kg

• 1,698kg

• 120kg

• 1,200kg

A company uses the following accounts to record inventory transactions:

Inventory account

Trade payables control account

Bank account

Production account

What will be the correct double-entry posting for the receipt of materials into inventory paying on credit?

• DR Inventory, CR Bank account

• DR Trade payables control account, CR Inventory

• DR Bank account, CR Inventory

• DR Inventory, CR Trade payables control account

A company uses the following accounts to record inventory transactions:

Inventory account

Trade payables control account

Bank account

Production account

What will be the correct double-entry posting for the return of materials from the production line back into inventory

• DR Inventory, CR Production

• DR Production, CR Inventory

• DR Trade payables control account, CR Inventory

• DR Inventory, CR Trade payables control account

A business has the following stores records for inventory

1 Oct - 200kg purchased at a price of £3.20 per kg = total cost £640

5 Oct - 300kg purchased at a price of £3.50 per kg = total cost £1,050

On 10 Oct, the business issued 400kg to production. The total cost of this inventory was valued at £1,340

What valuation method has been used for the issue of 400kg's?

• First in First Out (FIFO)

• Average Cost (AVCO)