MATERIALS AND INVENTORY KNOWLEDGE CHECK

What is the primary purpose of maintaining an inventory?

• To increase the cost of goods sold
• To reduce the cost of goods sold
• To increase production costs
• To monitor stock levels

Which of the following is a direct material cost?

• Salary of the production manager
• Cost of raw materials used in production
• Factory rent expense
• Depreciation of machinery

What does the term "just-in-time inventory" refer to?

• Holding excess inventory to avoid stockouts
• Ordering supplies at the last minute
• Keeping inventory levels low to reduce storage costs
• Stockpiling large quantities of inventory

Which of the following is an example of indirect material cost?

• Nails used in furniture assembly
• Wood used in furniture manufacturing
• Packing materials used for shipping finished products
• Labour cost for furniture production

What is the purpose of conducting a physical inventory count?

• To track the movement of materials in the warehouse
• To verify the accuracy of inventory records
• To determine the cost of goods sold
• To calculate production costs

What is the role of safety stock in inventory management?

• To reduce storage costs
• To cover unexpected increases in demand
• To lower production costs
• To increase lead times

Which costing method assigns the same cost to all units of inventory, regardless of when they were purchased?

• FIFO
• LIFO
• Weighted Average
• Specific Identification

What is the purpose of a materials requisition form?

• To record the movement of finished goods
• To request the purchase of new equipment
• To request the transfer of materials from one department to another
• To authorize the use of raw materials in production

Which inventory valuation method assumes that the most recently purchased units are the first to be sold?

• FIFO
• LIFO
• Weighted Average
• Specific Identification