Accounting for Materials Quiz

What is the formula used to calculate raw materials order quantity?

(a)   +​ (b)   -​ (c)  

• Expected material usage
• Desired Closing Inventory
• Opening Inventory
• Total production cost
• Supplier lead time
• Market demand forecast

In which inventory valuation method is the remaining stock valued at older (lower) prices?

• FIFO (First-In, First-Out)

• LIFO (Last-In, First-Out)

• Cumulative Weighted Average (CWA)

• Periodic Weighted Average (PWA)

A company named NovaGear Industries manufactures a device called the Klyro. Each Klyro requires 3.8 kg of a raw material called Tarnex. At the start of July, NovaGear has 950 kg of Tarnex in stock. Additionally, there are 100 units of finished Klyros in inventory, which will be used to meet part of the production demand.

The revised production plan for the next three months is:

Month: July: 1,100 Klyros / August: 1,400 Klyros / September: 1,250 Klyros

To prepare for October’s production schedule, the company wants to have enough Tarnex in stock at the end of September to produce 150 Klyros.

If NovaGear places a single order for Tarnex at the beginning of July to meet all production requirements through September and to build up the required closing inventory, how many kilograms of Tarnex should it order?

• 14440

• 14820

• 13490

• 14250

What is the main characteristic of the Cumulative Weighted Average (CWA) method?

• Uses oldest inventory costs first

• Averages are calculated at the end of the period

• A running average is maintained after each purchase

• Values inventory at most recent purchase prices

Product X7 requires 0.5 kilograms of raw material R2 per unit. The production plan for period 9 is to manufacture 8,000 units of product X7. The inventory levels of raw material R2 are expected to increase by 300 kg during period 9. What is the budgeted usage of raw material R2 for producing product X7 in period 9?

• 4300 kgs

• 3700 kgs

• 4000 kgs

• 16000 kgs

During periods of inflation (rising prices), the FIFO method results in ​ (a)   cost of goods sold (COGS) because it assigns the ​ (b)   inventory costs to sales. This leads to ​ (c)   reported profits and a ​ (d)   value of closing inventory, as the remaining inventory reflects the more ​ (e)   purchase costs.

• lower
• older, cheaper
• higher
• recent, higher
• latest,expensive
• older,lower

What is the impact of using the LIFO method on the cost of goods sold (COGS) in a rising price environment?

• Based on older, usually cheaper prices

• Based on newer, often higher prices

• No impact on COGS

• Based on average prices

In the LIFO method, which inventory is sold first?

• Oldest inventory

• Newest inventory

• Average inventory

• Random inventory

A company experiences rising prices for its raw materials throughout the year. It uses one of the following inventory valuation methods: FIFO (First-In, First-Out), LIFO (Last-In, First-Out), CWA (Cumulative Weighted Average), and PWA (Periodic Weighted Average).

Based on this scenario, arrange the methods in order from the one that would result in the lowest closing inventory value to the one that would result in the highest closing inventory value.

• LIFO

• CWA

• PWA

• FIFO

Using the provided data, calculate the Cost of Goods Sold (COGS) for the month of May under the FIFO method.

• 8120

• 15480

• 16220

• 13380