Chapter 7: Material

1. In a period of continual price inflation for material purchases

• the LIFO method will produce lower profits than the FIFO method, and lower closing inventory values

• the FIFO method will produce lower profits than the LIFO method, and lower closing inventory values

• the LIFO method will produce lower profits than the FIFO method, and higher closing inventory values

• the FIFO method will produce lower profits than the LIFO method, and higher closing inventory values

The raw materials issued to a job were overestimated and the excess is being sent back to the materials store. What document is required?

• Stores credit note

• Materials returned note

• Stores debit note

• 
  Materials transfer note

Average usage of a raw material is 200 kg per day, the average ordering lead time is five days, the reorder level is 1,600 kg and the reorder quantity is 2,800 kg. What is the average raw material inventory?

• 
  800 kg

• 1,700 kg

• 1,400 kg

• 2,000 kg

A component has a safety inventory of 500, a re-order quantity of 3,000 and a rate of demand which varies between 200 and 700 per week. What is the approximate average inventory?

• 2,000

• 2,500

• 2,300

• 3,500

If JH Co produces 1 unit of Product L from 2 kg of Material W, and wastage equates to 5% of material input, how many kg of Material W should JH Co buy in order to produce 4,000 units of Product L?

• 4,000 kg

• 8,000 kg

• 4,211 kg

• 8,421 kg

Which of the following statements, concerning inventory management, is TRUE?

• Setting a minimum control level seeks to ensure that a stockout does not occur

• With a continuous stocktaking system there is a continuous record of the actual quantity of each item of inventory

• The reorder level is the amount purchased to replenish inventory

• Periodic stocktaking involves frequent counts and checks on a proportion of the inventory items

Holding costs are included in the Economic Order Quantity formula. Which of the following are examples of holding costs?

1 Warehouse rent

2 Interest on inventory investment

3 Carriage inwards 4 Inventory theft

• 1 and 2

• 1 and 3

• 3 and 4

• 1, 2, 4