Costing - Study Mode
[#996] Perpetual inventory system involves __________
Correct Answer
(A) bincard and stores ledger
Explanation
Solution: Perpetual inventory system involves bincard and stores ledger. Perpetual Inventory System keeps a record of every now and then of materials. It comprises of Bin Card and Stores Ledger, to keep track of various items.
[#997] FIFO is ________.
Correct Answer
(B) First In First Out
Explanation
Solution: "FIFO" stands for first-in, first-out, meaning that the oldest inventory items are recorded as sold first but do not necessarily mean that the exact oldest physical object has been tracked and sold. In other words, the cost associated with the inventory that was purchased first is the cost expensed first.
[#998] LIFO method of pricing of materials is more suitable when _________.
Correct Answer
(A) material prices are rising
Explanation
Solution: LIFO method of pricing of materials is more suitable when material prices are rising. LIFO method of pricing issues is suitable because materials are issued at the current market prices which are high. This method thus helps in showing a lower profit because of increased charge to production during periods of rising prices and lower profit reduces burden of income-tax.
[#999] Average method of pricing the material issues is useful when ___________.
Correct Answer
(D) material prices are fluctuating
Explanation
Solution: Average method of pricing the material issues is useful when material prices are fluctuating. Under the 'Average Cost Method', it is assumed that the cost of inventory is based on the average cost of the goods available for sale during the period. The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale.
[#1000] Scrap is ________.
Correct Answer
(A) residue of material
Explanation
Solution: Scrap is residue of material. It is incidental residue from the materials used in manufacturing operations which is recoverable and measurable without processing.