Q.1 Which of the following is the main objective of material cost control?
To reduce wages
To minimize material cost and wastage
To increase overheads
To increase selling price
Explanation - Material cost control ensures efficient use of materials by minimizing waste and optimizing purchase and usage, reducing overall cost.
Correct answer is: To minimize material cost and wastage
Q.2 The process of ensuring that materials are available when required and in right quantity is called:
Inventory control
Cost allocation
Overhead absorption
Depreciation
Explanation - Inventory control manages materials to ensure timely availability without excessive storage costs.
Correct answer is: Inventory control
Q.3 Which document authorizes the purchase of materials?
Material requisition note
Purchase requisition
Bin card
Goods received note
Explanation - Purchase requisition is prepared by the user department to request procurement of materials.
Correct answer is: Purchase requisition
Q.4 EOQ stands for:
Estimated Order Quantity
Economic Order Quantity
Effective Order Quota
Evaluated Order Quantity
Explanation - Economic Order Quantity (EOQ) determines the optimal order size that minimizes total ordering and holding costs.
Correct answer is: Economic Order Quantity
Q.5 Which of the following is NOT an objective of material control?
Avoiding stock-out
Maintaining quality
Increasing selling price
Minimizing wastage
Explanation - Material control aims to minimize cost, avoid stock-out, and maintain quality, not to manipulate selling price.
Correct answer is: Increasing selling price
Q.6 The tool used for recording the receipt, issue, and balance of material at storage is:
Bin card
Cost sheet
Voucher
Ledger
Explanation - Bin card is maintained by the storekeeper to track receipts, issues, and balances of material.
Correct answer is: Bin card
Q.7 In ABC analysis, ‘A’ category items are:
Low-value items
Moderate-value items
High-value items
Obsolete items
Explanation - ABC analysis categorizes items based on value; ‘A’ represents high-value items needing strict control.
Correct answer is: High-value items
Q.8 Which method of pricing issues assumes that the oldest stock is issued first?
FIFO
LIFO
Weighted Average
Simple Average
Explanation - FIFO (First In First Out) assumes materials received first are issued first.
Correct answer is: FIFO
Q.9 Stock verification is done primarily to:
Increase profit
Match physical stock with book records
Determine selling price
Control wages
Explanation - Stock verification ensures physical stock tallies with records, preventing fraud and discrepancies.
Correct answer is: Match physical stock with book records
Q.10 The maximum stock level is:
The level below which stock should not fall
The level above which stock should not rise
The average stock held
The minimum stock required
Explanation - Maximum stock level prevents overstocking and excessive carrying costs.
Correct answer is: The level above which stock should not rise
Q.11 Perpetual inventory system is:
Annual stock-taking method
Continuous recording of stock movements
System for non-moving stock
Method for calculating EOQ
Explanation - Perpetual inventory system keeps continuous track of stock through records and bin cards.
Correct answer is: Continuous recording of stock movements
Q.12 Which level of stock signals the need to place a new order?
Maximum level
Reorder level
Minimum level
Danger level
Explanation - Reorder level indicates when stock should be replenished to avoid stock-out.
Correct answer is: Reorder level
Q.13 The system of maintaining stock records in terms of money value is called:
Store ledger
Bin card
Cost sheet
Voucher
Explanation - Store ledger records stock in terms of money value, while bin cards record quantity.
Correct answer is: Store ledger
Q.14 Which of the following is NOT included in material control techniques?
EOQ
ABC analysis
Bin card
Straight line depreciation
Explanation - Depreciation relates to fixed assets, not materials. EOQ, ABC analysis, and bin cards are material control tools.
Correct answer is: Straight line depreciation
Q.15 The danger level of stock is:
The maximum quantity to be stored
The level below minimum stock
The average quantity of stock
The level to reorder materials
Explanation - Danger level is lower than minimum stock and indicates urgent need for replenishment.
Correct answer is: The level below minimum stock
Q.16 Which statement about EOQ is true?
It increases holding cost
It balances ordering and holding costs
It maximizes stock-out risk
It reduces purchase price
Explanation - EOQ is designed to minimize total inventory cost by balancing ordering and holding costs.
Correct answer is: It balances ordering and holding costs
Q.17 The document used to authorize issue of materials to production is:
Purchase requisition
Material requisition note
Goods receipt note
Bin card
Explanation - Material requisition note is used by production department to draw materials from stores.
Correct answer is: Material requisition note
Q.18 Just-In-Time (JIT) approach focuses on:
Maintaining high stock
Eliminating waste by receiving material only when needed
Maximizing reorder levels
Maintaining buffer stock
Explanation - JIT minimizes inventory by ensuring materials arrive only when required in production.
Correct answer is: Eliminating waste by receiving material only when needed
Q.19 Which among the following is a disadvantage of overstocking?
Lower carrying cost
Higher storage and obsolescence risk
Reduced capital blockage
Lower insurance cost
Explanation - Overstocking leads to higher carrying costs, risk of deterioration, and blocking of working capital.
Correct answer is: Higher storage and obsolescence risk
Q.20 Which is NOT a method of inventory valuation?
FIFO
LIFO
Weighted Average
Marginal Costing
Explanation - Marginal costing is a costing technique, not an inventory valuation method.
Correct answer is: Marginal Costing
Q.21 Standardization and codification of materials help in:
Increasing selling price
Avoiding duplication of materials
Reducing wages
Inflating profits
Explanation - Standardization and codification ensure uniform identification of materials, reducing duplication and confusion.
Correct answer is: Avoiding duplication of materials
Q.22 Which system uses symbols and numbers to classify materials?
Perpetual system
Bin card system
Codification system
Store ledger system
Explanation - Codification assigns unique codes to materials for easy identification and control.
Correct answer is: Codification system
Q.23 A tool used for visual representation of stock level is:
Inventory chart
Cost sheet
Ledger
Trial balance
Explanation - Inventory charts help visualize stock positions relative to reorder, maximum, and minimum levels.
Correct answer is: Inventory chart
Q.24 Which of the following costs are considered in EOQ calculation?
Ordering and carrying costs
Direct wages and salaries
Overheads and rent
Profit margin
Explanation - EOQ focuses on balancing ordering and carrying costs to minimize total inventory cost.
Correct answer is: Ordering and carrying costs
Q.25 Stock turnover ratio is used to measure:
Efficiency of inventory utilization
Sales growth
Overhead absorption
Profitability
Explanation - Stock turnover ratio indicates how efficiently inventory is converted into sales or usage in production.
Correct answer is: Efficiency of inventory utilization