Inventory Management – Financial and Strategic Management MCQ

Students should practice Inventory Management – CS Executive Financial and Strategic Management MCQ Questions with Answers based on the latest syllabus.

Inventory Management – Financial and Strategic Management MCQ

Question 1.
Dec 2014: Which type of material is classified as ‘A’ type in ABC analysis
(A) High price, more quantity
(B) High price, less quantity
(C) Low price, more quantity
(D) Low price, less quantity
Answer:
(B) High price, less quantity

Question 2.
Dec 2014: Which of the following formula cannot be used to calculate re-order level
(A) Minimum level + consumption during lead time
(B) Maximum consumption × maximum re-order period
(C) Maximum consumption × lead time + safety stock
(D) Minimum consumption × minimum re-order period
Answer:
(D) Minimum consumption × minimum re-order period

Question 3.
Dec 2014: Which of the following is recorded by bin card
(A) Quantity.
(B) Quantity and value
(C) Value
(D) Quality
Answer:
(A) Quantity.

Question 4.
Dec 2014: If the minimum stock level and average stock level of raw material ‘A’ are 4,000 & 9,000 emits respectively, what is its reorder quantity
(A) 8,000 units
(B) 11,000 units
(C) 10,000 units
(D) 9,000 units
Hint:
Let the reordering quantity be ‘x’
Average Level = Minimum level + 1/2 Reordering quantity
9.0 = 4,000 + 0.5x
5.0 = 0.5x
x = Reordering quantity = 10,000
Answer:
(C) 10,000 units

Question 5.
Dec 2014: The method of regular physical verification of material throughout the year is known as
(A) Periodic stock taking
(B) Bin card system
(C) Continuous stock taking
(D) Stock ledger system
Answer:
(C) Continuous stock taking

Question 6.
Dec 2014: In an inflationary situation, which system of inventory valuation shows higher profits
(A) LIFO
(B) FIFO
(C) HIFO
(D) Weighted average
Answer:
(B) FIFO

Question 7.
Dec 2014: Under which of the following inventory control technique, the maximum and minimum level of each stock is laid down
(A) Min-max plan
(B) Two bin system
(C) Order cycle system
(D) ABC analysis
Answer:
(A) Min-max plan

Question 8.
Dec 2014: A company manufactures 5,000 units of a product per month. The cost of placing an order is ₹ 100. The purchase price of the raw material is ₹ 10 per kg. The average consumption of raw material is 275 kg per week. The carrying cost of inventory is 20% per annum. The economic order quantity is___
(A) 1,196 kg
(B) 707 kg
(C) 2,449 kg
(D) 2,400 kg
Hint:
Annual consumption = Average consumption × No. of weeks in year
= 275 kg × 52
= 14,300 kg
\(\sqrt{\frac{2 \times 14,300 \mathrm{~kg} \times \text { Rs. } 100}{\text { Rs. } 10 \times 20 \%}}\)
EOQ = 1,195.83 kg (say 1,196 kg)
Answer:
(A) 1,196 kg

Question 9.
June 2015: Under which of the following inventory control techniques, two piles or bundles are maintained for each item of stock
(A) Min-max plan
(B) Order cycling system
(C) Two-bin system
(D) ABC analysis
Answer:
(C) Two-bin system

Question 10.
June 2015: A store ledger is a record of receipts, issues, and closing balances of material by entering
(A) Quantity only
(B) Quantity and value
(C) Value only
(D) Quality only
Answer:
(B) Quantity and value

Question 11.
June 2015: Bill of material acts as an authorization to the store’s department in procuring the material and all the materials listed on the bill is sent to the.
(A) Sales department
(B) The Production department
(C) Accounts department
(D) Stores department
Answer:
(B) The Production department

Question 12.
June 2015: Which of the following method is based on the assumption that the costliest materials are issued first and inventory is valued at the lowest possible price
(A) FIFO method
(B) UFO method
(C) Highest-in-first-out method
(D) Weighted average method
Answer:
(C) Highest-in-first-out method

Question 13.
June 2015: For a product-X, the following information is available:
Maximum consumption per week: 300 units
Normal consumption per week: 200 units
Re-order period: 2 to 4 weeks
The re-order level will be
(A) 400 units
(B) 200 units
(C) 600 units
(D) 800 units
Hint:
Re-order Level = (Maximum usage × Maximum delivery period)
= (300 units × 4 weeks)
= 1,200 units
Answer:
(B) 200 units

Question 14.
June 2015: A company requires 1,500 units, of an item per month. The cost of each unit is Rs. 30. The cost of placing an order is Rs. 200 and the material carrying charges work out to be 20% of the average material. The economic order quantity (EOQ) is
(A) 1,095 units
(B) 316 units
(C) 490 units
(D) 33 units
Hint:
Inventory Management – Financial and Strategic Management MCQ 6
EOQ = 1,095.45 units say 1,095 units
Answer:
(A) 1,095 units

Question 15.
June 2015: Following information is available regarding a product-X:
1st January 2015:
Opening balance: 50 units @ Rs. 4
Receipts:
5th January 2015: 100 units @ Rs. 5
12th January, 2015: 200 units @ Rs. 5.50
Issues:
2nd January 2015: 30 units
18th January 2015: 170 units
The value of closing stock according to the FIFO method is
(A) ₹ 660
(B) ₹ 770
(C) ₹ 825
(D) ₹ 1,100
Hint:
Inventory Management – Financial and Strategic Management MCQ 7
Answer:
(C) ₹ 825

Question 16.
June 2015: In case of rising prices, the FIFO method will provide –
(A) Lowest value of closing stock and profit
(B) Highest value of closing stock and profit
(C) Highest value of the closing stock but the lowest value of profit
(D) Lowest value of the closing stock but highest value of profit
Answer:
(B) Highest value of closing stock and profit

Question 17.
Dec 2015: In a company, the weekly minimum and maximum consumption of Material-A is 25 and 75 units respectively. The re-order quantity as fixed by the company is 300 units. The material is received within 4 to 6 weeks from the issue of supply order. The maximum level of Material-A is
(A) 640 Units
(B) 650 Units
(C) 175 Units
(D) 560 Units
Hint:
Reorder Level = (Maximum usage × Maximum re-order period)
= (75 × 6)
= 450
Maximum level = (Re-order level + Re-order qty) – (Minimum consumption × Minimum re-order period)
= (450 + 300) – (25 × 4)
= 650
Answer:
(B) 650 Units

Question 18.
Dec 2015: FIFO method of valuing material issues is suitable in times of__
(A) Rising prices
(B) Falling prices
(C) Price fluctuation
(D) Boom period
Answer:
(B) Falling prices

Question 19.
Dec 2015: About 50 units are required every day for a machine. A fixed cost of ₹ 50 is incurred for placing an order. The inventory carrying cost per unit amounts to ₹ 0.02 per day. The lead period is 32 days. Economic Order Quantity is
(A) 200 Units
(B) 300 Units
(C) 500 Units
(D) 100 Units
Hint:
Annual Consumption = 50 × 365 = 18,250.
Carrying cost p. u. p. a = 0.02 × 365 = 7.3
EOQ = \(\sqrt{\frac{2 \times \text { Annual consumption } \times \text { Ordering cost }}{\text { Carrying cost p. u. p. a }}}\)
= \(\sqrt{\frac{2 \times 18,250 \times 50}{7.3}}\)
EOQ = 500 units
Answer:
(C) 500 Units

Question 20.
June 2016: XYZ Ltd. had 4,000 units of inventory in hand on 1st March 2016, costing ₹ 4 per unit. Purchases and issues of material during the month were as follows:
Inventory Management – Financial and Strategic Management MCQ 1
The cost of inventory as of 31 st March 2016 under FIFO and weighted average cost method will be
(A) ₹ 27,000 and ₹ 24,498
(B) ₹ 27,000 and ₹ 23,625
(C) ₹ 22,000 and ₹ 23,625
(D) ₹ 22,000 and ₹ 24,498
Hint:
Inventory Management – Financial and Strategic Management MCQ 8
Inventory Management – Financial and Strategic Management MCQ 9
Option (A) is correct (there is a difference of Rs. 2 due to rounding of digits)
Answer:
(A) ₹ 27,000 and ₹ 24,498

Question 21.
June 2016: EOQ is 200 units, ordering cost Rs. 20 per order, and total purchases 4,000 units. The carrying cost per unit will be
(A) ₹ 2
(B) ₹ 6
(C) ₹ 4
(D) None of the above
Hint:
Inventory Management – Financial and Strategic Management MCQ 10
40,000x = 1,60,000
x = 4
Alternatively, students can adopt the following procedure to solve the MCQ.
The figure of each option should be put in the above formula and check that whether EOO comes to 200 or not. if you apply the figure of Option (C) Le. Rs. 4 in the above formula, EOQ comes to 200, and hence Option (C) is correct.
Answer:
(C) ₹ 4

Question 22.
June 2016: Which one of the following statements is true in ABC classification of materials
(A) items of material have moderate 96 of cost and high 96 of quantity
(B) ‘A’ items of material have high 96 of cost and low 96 of quantity
(C) ‘A’ items of material have high 96 of cost and high 96 of quantity
(D) ‘B’items of material have moderate 96 of cost and low 96 of quantity
Answer:
(B) ‘A’ items of material have high 96 of cost and low 96 of quantity

Question 23.
June 2016: In a situation of rising prices, profit and tax liability would be lower under method than under method of material issue pricing.
(A) FIFO; LIFO
(B) LIFO; FIFO
(C) LIFO; Average
(D) FIFO; Average
Answer:
(B) LIFO; FIFO

Question 24.
June 2016: The technique of economic order quantity is losing significance since the development of
(A) Perpetual inventory
(B) Just-in-time
(C) First-in-first-out
(D) ABC analysis
Answer:
(B) Just-in-time

Question 25.
June 2016: The following information is given for Component ‘A’:
Normal usage 50 units per week, maximum usage 75 units per week, reorder period 4 to 6 weeks. The minimum level of stock will be
(A) 250 Units
(B) 150 Units
(C) 450 Units
(D) 200 Units
Hint:
Re-Order Level = (Maximum Usage × Maximum Delivery Period)
= (75 Units × 6 Weeks)
= 450
Minimum Level = Re-Order Level – (NormaI Usage × Average Delivery Period)
= 450 Units – (50 Units × 5 Weeks)
200
Answer:
(D) 200 Units

Question 26.
June 2016: Quarterly consumption of materials: 2,000 kg; Cost of placing an order: Rs. 50; Cost per unit: Rs. 40; Storage and other carrying costs: 8% of average inventory.
The economic order quantity and number of orders to be placed per quarter of the year will be
(A) 400 kg and 5 orders
(B) 500 kg and 4 orders
(C) 500 kg and 12 orders
(D) 400 kg and 6 orders
Hint:
Inventory Management – Financial and Strategic Management MCQ 11
EOQ = 500 kg
No. of orders = \(\frac{\text { Annual Consumption }}{\text { Re-ordering/EOQ qty }}=\frac{8,000 \mathrm{~kg}}{500 \mathrm{~kg}}\) =16 orders in year
No. of orders for the quarter = \(\frac{16}{4}\) = 4 orders per quarter
Answer:
(B) 500 kg and 4 orders

Question 27.
June 2016:
Re-order Quantity: 300 kg
Minimum usage: 20 kg per day
Minimum lead time: 5 days
Maximum stock level: 400 kg
Re-order level will be
(A) 350 kg
(B) 200 kg
(C) 375 kg
(D) 150 kg
Hint:
Maximum level = (Re-order level + Re-ordering qty) – (Minimum usage × Minimum delivery period)
400 = (x + 300 units) – (20 units × 5 days)
x = 200
Answer:
(B) 200 kg

Question 28.
June 2016: Which one of the following is the correct sequence of the purchase procedure of inventory___
(A) Indenting for material, issuing tenders, receiving quotations, and placing order
(B) Issuing tenders and receiving quotations, indenting for material, and placing order
(C) Placing order, issuing tenders and receiving quotations, and indenting for material
(D) Indenting for material and placing order
Answer:
(A) Indenting for material, issuing tenders, receiving quotations, and placing order

Question 29.
Dec 2016: _ account does not record the balance of stores ledger control account.
(A) Manufacturing
(B) Trading
(C) Profit and loss
(D) Work-in-progress
Answer:
(B) Trading

Question 30.
Dec 2016: A firm requires 12,800 units of a certain component which it buys @ Rs. 60 each. The cost of placing an order and following it up is Rs. 150 and annual storage charges work out to 10% of the cost of items. The number of units to be ordered to get maximum benefit to the firm are
(A) 1,000
(B) 900
(C) 800
(D) 320
Hint:
Inventory Management – Financial and Strategic Management MCQ 12
= \(\frac{38,40,000}{6}\)
EOQ = 800 units
Answer:
(C) 800

Question 31.
Dec 2016: Which of the following are advantages of perpetual inventory system:
(i) No interruption of the production process
(ii) More. wastage of material
(iii) Detect loss of stock due to theft, shrinkage, fire, etc.
(iv) Ascertain stock without physical verification
Select the correct answer from the options given below
(A) (i), (ii) and (iii)
(B) (ii), (iii) and (iv)
(C) (i), (ii) and (iv)
(D) (i), (iii) and (iv)
Answer:
(B) (ii), (iii) and (iv)

Question 32.
Dec 2016: Following statements are either true (T) or false (F):
(P) FIFO method of valuing material issues is suitable in a time of rising prices
(Q) Valuation of closing stock is same under both FIFO and LIFO method
(R) Bin card makes a record of the quantity and value of materials kept in the stores
(S) A bill of material gives a complete list of all material required with quantities for a particular job.
Select the correct answer from the options given below-
Inventory Management – Financial and Strategic Management MCQ 2
Answer:
(C)

Question 33.
Dec 2016: Match the following:

(P) The visible or invisible loss cannot be collected and in certain cases, it involves further costs of disposing 1. Defectives
(O) The residue which is measurable and has a minor value 2. Spoilage
(R) Components so damaged in the process and cannot be repaired 3. Scrap
(S) Imperfections may arise because of sub-standard work, can be made perfect by paying some additional expenses 4. Waste

Select the correct answer from the options given below
Inventory Management – Financial and Strategic Management MCQ 3
Answer:
(A)

Question 34.
Dec 2016: A written comprehensive order, with specification, material code, and quantity sent to inform the purchasing department, of a need for material is called
(A) Purchase order
(B) Bill of material
(C) Purchase requisition
(D) Bin card
Answer:
(B) Bill of material

Question 35.
Dec 2016: Choose the correct statements from the following:
(1) All the indirect taxes are added to the purchase price of material
(2) Trade and cash discounts are deducted from the cost of material
(3) ABC analysis is a value-based system of material control
(4) In garment manufacturing, the cost of thread and buttons are indirect material costs.
Select the answer from the options given below
(A) (1) and (2),
(B) (2), (3), and (4)
(C) (3) and (4)
(D) (1), (3), and (4)
Note: MCQ is wrongly drafted. For further clarification please see the hints.
Hint:
Inventory Management – Financial and Strategic Management MCQ 13
None of the given options is correct.
Answer:

Question 36.
Dec 2016: Amaze Ltd. had an opening inventory of 5,000 units costing ₹ 5 per unit on 1st April 2016. Following receipts and issues took place in April 2016:
5th April 2016: Purchased 800 units @ ₹ 8 per unit
12th April 2016: Purchased 200 units @ ₹ 8 per unit
15th April 2016: Issued 3,000 units
25th April 2016: Purchased 1,000 units @ ₹ 9 per unit
Cost of inventory as of 30th April 2016 under weighted average basis will be:
(A) ₹ 25,500
(B) ₹ 27,000
(C) ₹ 20,000
(D) ₹ 23,500
Hint:
Inventory Management – Financial and Strategic Management MCQ 14
Answer:
(A) ₹ 25,500

Question 37.
Dec 2016: A company produces a single product for which the following data is available:
Average production per week: 200 units
Usage per unit: 10 kg Re-order level: 8,000 kg Delivery time required: 2 weeks
The minimum level of stock required will be
(A) 3,000 kg
(B) 5,000 kg
(C) 4,000 kg
(D) 2,500 kg
Hint:
Minimum level = Re-order level – (Normal usage × Average delivery period)
= 8,000 – (2,000 × 2)
= 4,000
Answer:
(C) 4,000 kg

Question 38.
Dec 2016: Which of the following is considered as normal loss of material
(A) Pilferage
(B) Loss due to flood
(C) Loss due to accident
(D) Loss arising from careless handling of material
Note: MCQ is wrongly drafted. For further clarification see the hints.
Hint:
Normal loss is unavoidable and uncontrollable.
Normal loss is that loss that has necessarily incurred and thus is unavoidable, Examples:

  • Loss by evaporation
  • Loss due to loading and unloading
  • Loss due to breaking the bulk, etc.

Abnormal loss is that loss that arises due to inefficiency in operations, mischief, carelessness, etc.
Examples are –

  • Theft or pilferage
  • Breakage
  • Fire, accident, flood
  • Use of inaccurate instruments
  • Improper storage etc.

In option all the losses are given are ‘Abnormal losses’; hence none of the given options is correct.
Answer:

Question 39.
Dec 2016: The maximum and minimum lead time is 4 weeks and 3 weeks respectively. If the maximum and minimum weekly consumption is 25 units and 20 units respectively, the re-ordering level will be
(A) 100 Units
(B) 110 Units
(C) 120 Units
(D) 140 Units
Hint:
Re-Order Level = (Maximum Usage × Maximum Delivery Period)
= (25 × 4)
= 100 units
Answer:
(A) 100 Units

Question 40.
June 2017: A, B, C analysis is
(A) a system of profit planning
(B) a technique of financial analysis
(C) a technique of inventory control
(D) a technique of profit determination
Answer:
(C) a technique of inventory control

Question 41.
June 2017: Two avoidable reasons for the difference between bin card and physical quantity of material may be and wrong posting in the bin card.
(A) Pilferage
(B) Normal
(C) Abnormal
(D) Reasonable
Answer:
(A) Pilferage

Question 42.
June 2017r When prices fluctuate widely, which of the following method will even out the effect of fluctuations?
(A) Weighted average
(B) FIFO
(C) LIFO
(D) Simple average
Answer:
(A) Weighted average

Question 43.
June 2017: In which of the following methods, material issues are priced at a predetermined rate?
(A) Replacement price method
(B) Specific price method
(C) Inflated price method
(D) Standard price method
Answer:
(D) Standard price method

Question 44.
June 2017: Which of the following does not normally appear on a material requisition form?
(A) Job number
(B) Unit cost
(C) Supplier’s name
(D) Quantity requisitioned
Answer:
(C) Supplier’s name

Question 45.
Dec 2017: Which of the following difference in material stock adjusted by considering as part of the material cost?
(A) Apparent differences
(B) Differences due to abnormal causes
(C) Differences due to avoidable causes
(D) Differences due to unavoidable causes
Answer:
(D) Differences due to unavoidable causes

Question 46.
Dec 2017: This type of loss is connected with both input and output:
(A) Waste
(B) Scarp
(C) Defectives
(D) All of the above
Answer:
(A) Waste

Question 47.
Dec 2017: Decision regarding the centralized purchase of material has to be taken on the basis of:
(A) Geographical separation of plant
(B) Homogeneity of products
(C) Type of material to be purchased
(D) All of the above
Answer:
(D) All of the above

Question 48.
Dec 2017: The rate per kg of material P, Q, R & S are respectively ₹ 12,₹ 15,₹ 18 & ₹ 21. The input-output ratios of the material are 140%, 130%, 120% & 110% respectively. The most economical material for production is:
(A) P
(B) Q
(C) R
(D) S
Hint:
Rate per kg of input of material P, Q, R, and S are ₹ 12, ₹ 15, ₹ 18 & ₹ 21. Input-output ratio of materials are 140%, 130%, 120% and 110%.
Suppose 1 kg input is introduced then the output will be 1.4, 1.3, 1.2, and 1.1 kg respectively.
Cost per kg of output will be –
Inventory Management – Financial and Strategic Management MCQ 15
Answer:
(A) P

Question 49.
Dec 2017: During the time of inflation, the method of pricing of material issue which leads to a lower material cost for a job is:
(A) FIFO
(B) LIFO
(C) HIFO
(D) Standard Pricing Method
Answer:
(A) FIFO

Question 50.
Dec 2017: A Ltd. submits the following data:
Normal uses (unit per week): 50
Minimum usage (unit per week): 25
Maximum usage (unit per week): 75
Re-order period (weeks): 4-6
Calculate re-order level.
(A) 100 units
(B) 200 units
(C) 150 units
(D) 450 units
Hint:
Re-order level = (Maximum usage × Maximum delivery period)
= (75 units × 6 weeks)
= 450 units
Answer:
(A) 100 units

Question 51.
Dec 2017: If the annual carrying cost of Material Z is ₹ 4 per unit and its total carrying cost is ₹ 12,000 p.a., the economic order quantity of material is:
(A) 3,000 units
(B) 4,000 units
(C) 5,000 units
(D) 6,000 units
Hint:
Annual Carrying Cost = [\(\frac{\text { EOQ quantity }}{2}\) × Carrying cost p.u]
12,000 = [\(\frac{x}{2}\) × 4]
x = 6,000
Answer:
(D) 6,000 units

Question 52.
Dec 2017: The most suitable inventory control technique for spare parts is:
(A) ABC analysis
(B) VED analysis
(C) JIT analysis
(D) Control ratios
Answer:
(B) VED analysis

Question 53.
Dec 2017: Under the LIFO method, the purchases and issues are as follows:
March 1 Purchased 300 units @ ₹ 3 each
March 5 Purchased 600units @ ₹ 4 each
March 6 Issued 500 units
March 12 Purchased 700 units @ ₹ 5 each
March 16 Issued 800 units
The value of closing stock shall be:
(A) ₹ 900
(B) ₹ 1,200
(C) ₹ 1,500
(D) ₹ 2,100
Hint:
Inventory Management – Financial and Strategic Management MCQ 16
Answer:
(A) ₹ 900

Question 54.
June 2018: Which of the following is not a cost price method of pricing material issues?
(A) First-in-first-out (FIFO) method
(B) Last-in-first-out (LIFO) method
(C) Standard price method
(D) Specified price method
Answer:
(D) Specified price method

Question 55.
June 2018: Which of the following is not correct for the calculation of the re-ordering level of inventory?
(A) Maximum consumption × Maximum re-order period
(B) (Maximum consumption × Lead time) + Safety stock
(C) Minimum level + Consumption during time lag period
(D) (Maximum consumption × Lead time) – Safety stock
Answer:
(B) (Maximum consumption × Lead time) + Safety stock

Question 56.
June 2018:___is a value-based system of inventory control, in which materials are analyzed according to their value so that costly and more valuable materials are given greater attention.
(A) MAX-MIN plan
(B) Review of slow and non-moving items
(C) ABC Analysis
(D) Order cycling system
Answer:
(C) ABC Analysis

Question 57.
June 2018: For the financial year ended 31st March 2017, the figures extracted from the balance sheet of EXE Ltd. are as follow:
Opening stock ₹ 29,000
Closing stock ₹ 31,000
Cost of goods sold ₹ 2,40,000
The stock turnover ratio will be:
(A) 12 times
(B) 10 times
(C) 8 times
(D) 9 times
Hint:
Stock turnover ratio = \(\frac{\text { Cost of goods sold }}{\text { Average stock }}\) × 12 = \(\frac{2,40,000}{30,000}\) = 8 times
Answer:
(C) 8 times

Question 58.
June 2018: If EOQ is 200 units, ordering cost is ₹ 20per order and total purchases are 4,000 units. The carrying cost per unit will be:
(A) ₹ 4
(B) ₹ 6
(C) ₹ 8
(D) ₹ 2
Hint:
EOQ = \(\sqrt{\frac{2 \times \text { Annual consumption } \times \text { Ordering cost }}{\text { Carrying cost p. u. p. a }}}\)
Put the figures given in the option in the above formula and check at which figure EOQ comes 200.
Option A is correct.
Answer:
(A) ₹ 4

Question 59.
June 2018: Which of the following items can be classified as “C” as per ABC analysis of inventory control? ‘
Inventory Management – Financial and Strategic Management MCQ 4
(A) Item number 5 only
(B) Item number 2 only
(C) Item numbers 3 and 4
(D) Item numbers 1 and 2
Hint:
Inventory Management – Financial and Strategic Management MCQ 17
Summary of classification:
Inventory Management – Financial and Strategic Management MCQ 18
Answer:
(A) Item number 5 only

Question 60.
Dec 2018: In the technique of inventory control, quantities in the hand of each item or class of stock are reviewed periodically say 30, 45, or 60 days.
(A) ABC Analysis
(B) Two-bin System
(C) Order Cycling System
(D) Perpetual Inventory System
Answer:
(C) Order Cycling System

Question 61.
Dec 2018: If the Minimum Stock Level is 2,500 units, Normal Consumption is 150 units, Maximum Re-order Period is 10 days and Normal Re-order Period is 8 days, then Reorder Level will be:
(A) 1,500 units
(B) 4,000 units
(C) 1,200 units
(D) 3,700 units
Answer:
(D) 3,700 units

Question 62.
Dec 2018: If annual total carrying cost, per unit carrying cost, and cost per order is 7 15,000, 7 10 & 7 150 respectively, then Economic Order Quantity will be:
(A) 1,500 units
(B) 3,000 units
(C) 100 units
(D) 200 units
Answer:
(D) 200 units

Question 63.
Dec 2018: Which of the following documents records the quantity and value of the material?
(A) Bin card
(B) Stores ledger
(C) Both (A) and (B)
(D) None of (A) and (B)
Answer:
(B) Stores ledger

Question 64.
___ method of pricing of material issues is not popular as it always undervalues the stock and leads to the creation of the secret reserve.
(A) Weighted Average Price
(B) Base Stock
(C) Highest in First Out
(D) Standard Price
Answer:
(C) Highest in First Out

Question 65.
Dec 2018: The monthly requirement of a component is 4,000 units. The cost per order is ₹ 1,000 and the carrying cost per unit per annum is ₹ 24. The Economic Ordering Quantity is:
(A) 2,000 units
(B) 4,000 units
(C) 577.35 units
(D) 1,825.74 units
Answer:
(A) 2,000 units

Question 66.
Dec 2018: During the time of inflation, which method of pricing of material issues leads to higher material costs for a job?
(A) First in first out method
(B) Last in first out method
(C) Highest in first out method
(D) Standard pricing method
Answer:
(B) Last in first out method

Question 67.
June 2019: The following information is given: 10,0 units of material are consumed per year; per-unit cost is ₹ 20; cost of processing an order is ₹ 50; Annual interest rate is 5%; Annual carrying cost of material per unit is 15% (other than interest). What would be the Economic Order Quantity (EOQ)?
(A) 200 units
(B) 500 units
(C) 400 units
(D) 100 units .
Answer:
(B) 500 units

Question 68.
June 2019: Which of the following is the objective of inventory management?
(A) To ensure timely delivery of inventory for production
(B) To avoid under or overproduction
(C) To maintain investment in inventories at the lowest level
(D) All of the above
Answer:
(D) All of the above

Question 69.
June 2019: V Ltd. is the manufacturer of picture tubes for TV, The following are details of their operation. Minimum usages 50 tubes per week, Maximum usages 200 tubes per week; Normal usages 100 tubes per week; lead time to supply 4-6 weeks; and Re-order quantity 400tubes. What would be the maximum and minimum level of stock?
(A) 1,400 units and 700 units
(B) 1,200 units and 700 units
(C) 1,300 units and 600 units
(D) 1,100 units and 600 units
Answer:
(A) 1,400 units and 700 units

Question 70.
June 2019: Smoke, dust, gases, and loss of weight due to seasoning are examples of
(A) Scrap
(B) Spoilage
(C) Defectives
(D) Waste
Answer:
(D) Waste

Question 71.
June 2019: The following information is given for receipts and issues of material in the month of March 2019.
Inventory Management – Financial and Strategic Management MCQ 5
What are the value of closing stock under the FIFO and LIFO methods?
(A) 800 and 900
(B) 900 and 800
(C) 1,000 and 900
(D) 900 and 1000
Answer:
(D) 900 and 1000

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