Costing - Study Mode

[#866] ABC analysis is an inventory control technique in which:
Correct Answer

(C) Inventory is classified into A, B and C Category with A being the lowest quantity, highest value

Explanation

Solution: ABC analysis is an inventory control technique in which Inventory is classified into A, B and C Category with A being the lowest quantity, highest value.

[#867] Which one out of the following is not an inventory valuation method?
Correct Answer

(D) EOQ

Explanation

Solution: EOQ is not an inventory valuation method. Economic order quantity (EOQ) is the ideal order quantity a company should purchase for its inventory given a set cost of production, a certain demand rate, and other variables.

[#868] In case of rising prices (inflation), LIFO will:
Correct Answer

(A) provide lowest value of closing stock and profit

Explanation

Solution: In case of rising prices (inflation), LIFO will provide lowest value of closing stock and profit. Since LIFO (last-in, first out) is moving the recent/higher costs to the cost of goods sold, the older/lower costs remain in inventory. The higher cost of goods sold generally results in smaller amounts of gross profit, net income taxable income, income tax payments, and certain financial ratios.

[#869] "Calculate Re-order level from the following: Consumption per week: 100-200 units Delivery period: 14-28 days"
Correct Answer

(B) 800 units

Explanation

Solution: Maximum consumption per week = 200 unit
Maximum delivery time = 28 days = 4 week
Re-order level = 200 x 4 = 800 units.

[#870] "Calculate EOQ (approx) from the following details: Annual Consumption: 24000 units Ordering cost: Rs 10 per order Purchase price: Rs 100 per unit Carrying cost: 5%"
Correct Answer

(A) 310