NAME _____________________________________ DATE ___________________ SCORE ____________________

Materials
Set B
Part 1. Theory

1. Two companies report the same cost of goods available for sale, but each employs a different
inventory costing method. IF the price of goods has increased during the period, then the entity using:
A. FIFO will have the highest ending inventory
B. FIFO will the highest cost of sales
C. The two companies will have the same amount of ending inventory.
D. Weighted average will have the highest ending inventory.

2. Carrying cost would include the following, except

A. Insurance
B. Property taxes
C. Loss due to spoilage
D. Purchasing agent salary

3. The method of inventory pricing that best approximates specific identification of the actual flow of
costs and units in most manufacturing situations is:
A. first-in, first-out
B. last-in, first-out
C. base stock
D. average cost

4. The expense that theoretically is not a correct part of inventory cost is:
A. freight-in
B. freight-out
C. inspection costs
D. accounting costs for materials received

5. The materials requisition:

A. is the list of materials requirements for each step in the production sequence
B. informs the purchasing agent of the quantity and kind of materials needed
C. certifies quantities received and reports results of inspection and testing
D. authorizes the storeroom to deliver types and quantities of materials to a given
department

6.The purchase order:

A. is the list of materials requirements for each step in the production sequence
B. informs the purchasing agent of the quantity and kind of materials needed
C. contracts for quantities to be delivered
D. certifies quantities received and reports results of inspection and testing

7. The time period between placing an order and its receipt in stock is known as:
A. Overtime
B. Carrying time
C. Lead time
D. Date time
8.The receiving report:
A. is the list of materials requirements for each step in the production sequence
B. informs the purchasing agent of the quantity and kind of materials needed
C. contracts for quantities to be delivered
D. certifies quantities received and reports results of inspection and testing

9.The purchase requisition may originate with all of the following except:
A. a storeroom employee
B. a materials record clerk
C. a receiving department clerk
D. a research, engineering, or other department employee who needs materials of a
special nature

10.The receiving department does all of the following except:

A. unloads and unpacks incoming materials
B. keeps informed concerning sources of supply, prices, and delivery schedules
C. matches materials received with descriptions on purchase orders
D. arranges for inspection, when necessary

11.A company has been ordering more than the economic order quantity. This would result in:
A. more frequent order points
B. carrying costs greater than order costs
C. equal safety stock costs and carrying costs
D. carrying costs less than order costs

12.The factor that need not be considered when calculating an inventory economic order quantity
(EOQ) is:
A. annual sales of a product
B. safety stock level
C. order-placing costs
D. storage costs

13. Theoretically, cash discounts permitted on purchased raw materials should be:
A. added to other income, whether taken or not
B. added to other income, only if taken
C. deducted from inventory, whether taken or not
D. deducted from inventory, only if taken

14. Which of the following must be maintained by the company to have an effective control of
materials?
A. Safety stock
B. Combination of duties
C. Limited access
D. None of these

15. To compute te reorder point, the following date must be needed except:
A. The rate at which the material is used.
B. The lead time
C. Safety stock
D. Carrying cost.
PROBLEMS:

The following information was available from the inventory records of the Anthony Company for
January 19X7:

Unit Total
Units Cost Cost
Balance at January 1, 19X7 ................................. 500 P 1.20 P600
Purchases:
January 6, 19X7 ............................................ 200 1.25 250
January 25, 19X7 .......................................... 400 1.30 520
Sales:
January 15, 19X7 .......................................... 500
January 27, 19X7 .......................................... 400
Balance at January 31, 19X7 ............................... 200

1. Assuming that Anthony maintains perpetual inventory records, what should be the inventory at
January 31, 19X7, using the average cost inventory method with the unit cost rounded to the nearest
cents and the total cost rounded to peso?

2. Assuming that Anthony uses periodic inventory method, what should be the cost of goods sold at
January 31, 19x7 using the average method rounded to the nearest peso?

3. Assuming that Anthony uses periodic inventory method, what should be the cost of goods sold at
January 31, 19x7 using the FIFO method rounded to the nearest peso?

4. An invoice for Products A, B and C is received from the Gregg Company. Invoice total are Product A,
P8,600; Product B, P5,060; and Product C, P3,840. The shipment weights 1,400 kg and the freight
charges are P280. Weights for the respective materials are 630, 440 and 330 kg.

How much is the share of Product A if the freight is to be allocated based on weight.

5. Royal Jewelry Corporation produces quality jewelry items for various retailers. For the coming year, it
has estimated it will consume 500 ounces of gold. Its carrying costs for a year are $2 per ounce. No
safety stock is maintained. If the EOQ is 100 ounces, what is the cost per order?

Royce corp buys 500 boxes of Item X-100 every two month. Order cost are P380 per order; carrying
costs are P1 per unit and vary directly with inventory investment. Currently, the company purchases the
item for P5

6.Determine the total ordering and carrying cost under current policy.

7. Determine the EOQ and the related total ordering and carrying cost
8. A firm estimates that it will need 25,000 cartons next year at a cost of P8 per carton. The estimated
carrying cost is 25% of average inventory investment and the cost to place an order is P20

What is the EOQ (rounded to the nearest peso)?

9. Refer to problem 8: How many orders will be placed in a year? Rounded to nearest day

10. What is the frequency in days, that orders should be placed based on a 365-day year

11. The XYZ Co. purchased materials listed at P50,000; terms, 3/15, n/30 on August 1. If the purchased
was paid on August 9, how much cash discount is to be recorded?

12.Assuming the same problem in problem #11, but XYZ grants a 15%,10%,,5% trade discounts. How
much discount is to be recorded?

Westinghouse Company has developed the following data to assist in controlling one of its inventory
items:

Order quantity 3,500 units

Normal use per day 500 units
Maximum use per day 600 units
Minimum use per day 100 units
Lead time 5 working days

Compute the following:

13.Safety stock (maximum)

14.Normal maximum inventory

15.Absolute Maximum Inventory