Question 1

Which of the following characteristics is relevant to process costing but not to job order costing?
A)Averaging process
B)Identifiable batches of production
C)Equivalent units
D)Use of standard cost

Accepted Answer

Equivalent units are a concept relevant to process costing, which involves averaging costs over large numbers of identical or similar units. Job order costing, in contrast, tracks costs for individual, identifiable batches or orders, making the concept of equivalent units irrelevant.

Question 2

Which of the following types of spoilage should not affect the recorded cost of inventories
A)Normal spoilage
B)Standard spoilage
C)Abnormal spoilage
D)Seasonal spoilage

Accepted Answer

Abnormal spoilage exceeds the expected amount of waste under efficient operating conditions and is not considered a normal cost of production. Therefore, it should not affect the recorded cost of inventories. Instead, it is often recorded as a loss in the period it occurs.

Question 3

A section of the cost of production report which shows the physical flow of units through various producing departments is usually labeled as
A)Schedule of physical flow
B)Quantity schedule
C)Equivalent units of production
D)Cost to be accounted for

Accepted Answer

The "Quantity schedule" is the section of the cost of production report that details the physical flow of units through various producing departments.

Question 4

What does FIFO mean?
A)Finished stock In Finished stock out
B)Fabrications Inward Fabrications Outward
C)Final Input Final Output
D)First In First Out

Accepted Answer

FIFO stands for "First In, First Out," which is an inventory management method where the first items placed in inventory are the first ones sold or used.

Question 5

Regardless of how long it takes to produce and sell inventory, inventory is always considered to be a?
A)Current asset
B)Current liability
C)Long-term asset
D)Stockholder's equity

Accepted Answer

Inventory is classified as a current asset on a company's balance sheet because it is expected to be sold or used within one year or within the business's normal operating cycle, whichever is longer.

Question 6

The latest cost of inventories is changed to production but the old prices are changed to inventories on hand?
A)Average
B)LIFO
C)FIFO
D)Perpetual

Accepted Answer

LIFO (Last In, First Out) accounting method assumes that the most recently acquired items are sold first, so the latest costs are charged to production, while the older costs remain in the inventory.

Question 7

An increase in inventories indicates that?
A)More merchandise was purchased then the amount sold to customer
B)Less merchandise was purchased then sold to the customer
C)Not all purchases were cash
D)Cash payments were more than purchases on account

Accepted Answer

An increase in inventories indicates that more merchandise was purchased than the amount sold to customers. This is because inventory levels rise when goods are bought or produced but not yet sold.

Question 8

Which type of inventory system is updated inventory system?
A)Periodic inventory system
B)Contingency inventory system
C)LIFO
D)Perpetual inventory system

Accepted Answer

The perpetual inventory system is an updated inventory system because it continuously tracks inventory levels, updating in real time with each sale or purchase.

Question 9

What is the principal criterion used to distinguish between tangible assets and inventories?
A)The physical substance of the asset
B)The acquisition cost of the asset
C)The nature of the company's activity, which determines the purpose for which the asset is held
D)The moment in the accounting period when the asset is acquired

Accepted Answer

The answer of What is the principal criterion used to...

Question 10

Which of the following method is suitable for calculating the cost of inventory when actual costs of individual units of merchandise can be determined from the accounting records?
A)FIFO Method
B)LIFO Method
C)Specific Identification Method
D)Average Method

Accepted Answer

The Specific Identification Method is suitable for calculating the cost of inventory when actual costs of individual units of merchandise can be determined from the accounting records. This method tracks the cost of each specific item in inventory and is often used for items that are not interchangeable, such as cars or real estate.

Question 11

The inventories are recorded at the latest price but the production cost is changed old cost price?
A)FIFO
B)Average
C)Both A & B
D)None

Accepted Answer

FIFO (First-In, First-Out) method assumes that the oldest items in inventory are sold first, hence the inventory is valued at the latest cost, while the cost of goods sold reflects older costs.

Question 12

Which one of the following methods for inventory valuation may be misleading when the units are identical?
A)FIFO Method
B)LIFO Method
C)Specific Identification Method
D)None

Accepted Answer

FIFO (First-In, First-Out) method assumes that the oldest units are sold first. When the units are identical, this assumption may not hold true, leading to a misleading valuation of inventory.

Question 13

During September, Khan had sales of 148,000, which made a gross profit of 40,000. Purchases amounted to 100,000 and opening inventory was 34,000. The value of closing inventory was?
A)Rs. 24,000
B)Rs. 26,000
C)Rs. 42,000
D)Rs. 54,000

Accepted Answer

The answer of During September, Khan had sales of 148,000,...

Question 14

Which type of inventory system requires updating the inventory balance at the end of the accounting period?
A)Periodic inventory system
B)LIFO
C)Perpetual inventory system
D)FIFO

Accepted Answer

The periodic inventory system requires updating the inventory balance at the end of the accounting period, unlike the perpetual inventory system which updates continuously. LIFO (Last In, First Out) and FIFO (First In, First Out) are methods for valuing inventory that can be used within both periodic and perpetual systems, but they do not themselves dictate the timing of inventory balance updates.

Question 15

In LIFO method of inventory valuation?
A)Issue of stocks to production is at latest price
B)Closing stock is at latest price
C)Both (a) & (b)
D)Neither (a) nor (b)

Accepted Answer

In the LIFO (Last In, First Out) method of inventory valuation, the issue of stocks to production is valued at the latest price, as the most recently acquired items are considered to be sold first. The closing stock, however, is valued at the oldest prices, not the latest.

Question 16

In FIFO method of inventory valuation?
A)Closing stock is at latest price
B)Issue of stocks to production is at earliest price
C)Both (a) & (b)
D)Neither (a) nor (b)

Accepted Answer

The answer of In FIFO method of inventory valuation?
A)Closing stock...

Question 17

Which one of the following does not describe a type of transfer pricing?
A)Target based
B)Cost based
C)Negotiated
D)Administered

Accepted Answer

Target-based pricing is not a recognized type of transfer pricing. Transfer pricing typically involves cost-based, negotiated, or administered pricing methods within an organization for transactions between its divisions or subsidiaries.

Question 18

Systematic evaluation of the trade-offs between product functionality and product cost while still satisfying customer needs is the definition of
A)Activity based management
B)Theory of constraints
C)Total quality management
D)Value engineering

Accepted Answer

Value engineering focuses on increasing the value of products by either improving their function or reducing their cost, with the aim of maintaining or improving customer satisfaction.

Question 19

Productivity is the ratio between input and __________.
A)Product
B)Output
C)Value
D)Cost

Accepted Answer

Productivity is defined as the ratio between the amount of output produced and the amount of inputs used in the production process.

Question 20

Labour productivity measures the growth in value added _____ per unit of labour used.
A)Input
B)Output
C)Cost
D)Energy

Accepted Answer

Labour productivity measures the growth in value added output per unit of labour used, reflecting how efficiently labour is used in the production process.

Quiz 3: Inventory, Productivity, Principles, and Costing Methodologies

Which of the following characteristics is relevant to process costing but not to job order costing?

Which of the following types of spoilage should not affect the recorded cost of inventories

A section of the cost of production report which shows the physical flow of units through various producing departments is usually labeled as

What does FIFO mean?

Regardless of how long it takes to produce and sell inventory, inventory is always considered to be a?

The latest cost of inventories is changed to production but the old prices are changed to inventories on hand?

An increase in inventories indicates that?

Which type of inventory system is updated inventory system?

What is the principal criterion used to distinguish between tangible assets and inventories?

Which of the following method is suitable for calculating the cost of inventory when actual costs of individual units of merchandise can be determined from the accounting records?

The inventories are recorded at the latest price but the production cost is changed old cost price?

Which one of the following methods for inventory valuation may be misleading when the units are identical?

During September, Khan had sales of 148,000, which made a gross profit of 40,000. Purchases amounted to 100,000 and opening inventory was 34,000. The value of closing inventory was?

Which type of inventory system requires updating the inventory balance at the end of the accounting period?

In LIFO method of inventory valuation?

In FIFO method of inventory valuation?

Which one of the following does not describe a type of transfer pricing?

Systematic evaluation of the trade-offs between product functionality and product cost while still satisfying customer needs is the definition of

Productivity is the ratio between input and __________.

Labour productivity measures the growth in value added _____ per unit of labour used.