1. Which of the following are the advantages of centralized purchasing?

1.

Greater knowledge of the technical requirements of each and every department.

2.

Reduced investment in inventories.

3.

Capability of taking advantages of market changes

4.

Greater control can be exercised.

NOTE: Centralized Purchasing is all the purchase made by a single purchase department. This kind of purchasing is
done at large organization or manufacturing unit.
2. Special indents are placed when the ordering level for different items of stocks are reached.

1.

True

2.

False
3. Which of the following are the objectives of store keeping?

1.

to provide maximum service at minimum cost

2.

to keep the record

3.

to co-ordinate with materials control

4.

to facilitate perpetual inventory

NOTE: Store Keeping means a service function of receiving materials, storing them and issuing them to workshops or
department.
Perpetual Inventory is a system in which a continuous record of receipt and issue of materials is maintained by the
stores department.
4. The storage and usage of materials is called inventory control

1.
2.

True
False
NOTE: Inventory Control is the systematic control and regulation of purchase, storage and usage of materials to
maintain the flow of production and avoiding excess inventory investment.
5. Which of the following departments is generally responsible for inventory management:

1.

Stores Department

2.

Purchase Department

3.

Finance Department

4.

1.
2.

Sale Department
NOTE: Stores department deal with the storage of materials.
Finance department deal with accounts of materials.
Sale department is concerned about the sale of material.
And Purchase department deals with the systematic purchases and usage of materials.
6. Economic ordering quantity is an essential element of min-max plan.
True
False
NOTE: EOQ means what and when the order should be placed. Whereas Min-max plan means to keeping a view on
the usage or requirement of the materials.
7. ABC analysis is aimed at selection control of materials

1.
2.

True
False
NOTE: ABC plan is the based on segregation of materials for control. As it is named as A for very strict control, B for
moderate control and C for loose control.
8. What is the basis on which the minimum level of inventory is fixed?

1.

Lead time

2.

Capital outlay

3.

Consumption per annum

4.

Production requirement
Self Explanatory.
9. What is the level of stock between the minimum level and nil stock called :

1.

Ordering level

2.

Danger level

3.

Safety level

4.

Maximum level
NOTE: Danger level means the level where normal issue of the material should be stopped and issue will be made
only in the case of specific instruction .Safety level means reserve stock to avoid stock-out.
10. Which of the following documents are required by Stores Department to issue materials?

1.

Bills of materials

2.

Material requisition note

3.

Worker voucher

4.

Bin Card
NOTE: Material requisition note contains the information about the description, code, quantity of material and job or
work order for which it is needed to issue the material by stores department.
11. Which of the following ledgers must tally with the total in the material cost summary in materials issue?

1.

Purchase ledger

2.

Stores ledger

3.

Distribution ledger

4.

Outgoing ledger
NOTE: Stores ledger is the account which contains the details of receipt and issue of materials so it should tally.
12. Which is the basis on which the price is charged for a scrap material that is returned to the stores?

1.

Original price

2.

Latest issue price

3.

Average price

4.

1.
2.

Utility value price

NOTE: Scrap is the material which is discarded from production so it has some value.
13. All abnormal losses should be treated as a part of the cost.
True
b. False
NOTE: Abnormal loss is that loss which arises due to inefficiency in operations, mischief, carelessness etc.Only
normal losses should be treated as a part of the cost as it can be controlled.
14. Which of the following account records the cost of scrap material?

1.

Overhead account

2.

Costing profit and loss account

3.

Production cost account

4.

1.
2.

Maintenance account
NOTE: The cost of scrap is calculated by reducing the sale price from the selling cost and this sum is taken as credit
to the production overhead account.(Overhead account is the account where all the indirect cost are calculated like
scrap).
15. The additional cost of rectification of goods is charged to the Costing Profit & Loss Account?
True
False
NOTE: The additional cost of rectification of goods is charged to the Factory Overhead
16. What is the account through which sales tax is accumulated and recovered?

1.

Costing profit & loss account

2.

Stores receiving and handling charges account

3.

Maintenance account

4.

1.
2.

Overhead account
Self Explanatory
17. It is not possible to calculate the exact cost of all items in material costing.
True
False
NOTE: Material cost is consisting of direct and indirect materials; all the exact direct and indirect materials cannot be
calculated.
18. Which of the following costs include cash discount?

1.

Maintenance Cost

2.

Overhead Cost

3.

Production cost

4.

None of the above

NOTE: Invoice price includes cash discount. Cash discount is obtained for the settlement of invoices for purchases of
materials with in the time stipulated by the supplier.
19. Which account is used for adjustment and transfer of the difference between the amount allocated and actual
expenses?

1.

Costing profit & loss account

2.

Stores receiving and handling charges account

3.

Maintenance account

4.

Overhead account
Self Explanatory
20. Which of the following is not considered under the min-max plan?

1.

Economic Ordering Quantity

2.

Identification of high value

3.

Critical items of stock

4.

All of the above

NOTE: Min-max plan means to keep a view on the usage or requirement of the materials.
21. Which of the following are not considered under the FIFO method?

1.

The physical flow of materials need not necessarily be in the order of the flow of cost

2.

Oldest cost price

3.

Standard price

4.

1.
2.

1.
2.

All the above

NOTE: FIFO (First in First out) method is the method of issuing the oldest stock first.
22. Standard price method reflects the actual cost.
True
False
NOTE: Standard price method is the issue of materials at the actual cost.
23. The cost of scrap is credited to the production overhead account.
True
False
NOTE: Scrap is the overhead occurs while production, so it is credited to the production overhead account.
24. Which account bears the cost of abnormal spoilage?

1.

Costing profit & loss account

2.

Stores receiving and handling charges account

3.

Maintenance account

4.

1.
2.

Overhead account
NOTE: Abnormal spoilage is those materials which are so damaged in the manufacturing process that cannot be
repaired or reconditioned.
25. Inventory turnover ratio helps the management to avoid capital being locked up unnecessarily.
True
False
NOTE: Inventory turnover ratio helps management to control and regulate the purchase, storage and usage of
materials to avoid capital being locked up unnecessarily for materials.

ANSWERS
1.

b,c,d

2.

False

3.

a,d

4.

False

5.

6.

False

7.

True

8.

a,c,d

9.

b,c

10.

11.

12.

13.

False

14.

15.

False

16.

17.

True

18.

19.

20.

21.

22.

False

23.

True

24.

25.

True