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Test answers for Inventory Management Test 2016

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1 Answered Test Questions:

1. Losses from inventory due to theft, evaporation, and waste are called ______________.

Answers:

• average cost

• realization

• shrinkage

• costing


77 NOT Answered Yet Test Questions:

(hold on, will be updated soon)
2. Which of the following entails carrying units in inventory at their acquisition costs until they are sold?

Answers:

• JIT inventory

• FIFO

• Acquisition cost basis

• LIFO

3. The portion of merchandise that is available for sale or use and that is allocated to the current period's usage is called the _______________.

Answers:

• total inventory

• raw materials

• cost of goods sold

• finished goods

4. At which of the following levels are indirect costs added to inventory?

Answers:

• Raw materials

• Finished goods

• LIFO

• FIFO

5. Which of the following is NOT an acceptable method for determining the cost of inventory?

Answers:

• FIFO method

• LIFO method

• Specific identification method

• All of the above are acceptable methods for determining the cost of inventory.

6. Which of the following inventory methods typically results in a lower net income?

Answers:

• LIFO

• Average cost

• FIFO

• Standard cost

7. Which of the following is NOT an example of distressed inventory?

Answers:

• Food with an expiration date that has passed

• Two-year-old cell phones

• Automobile tires

• Daily newspaper

8. The Cost of Goods Sold can be defined as __________________.

Answers:

• Beginning Inventory + Inventory Purchases + Costs of Production - Ending Inventory = COGS

• Ending Inventory = COGS

• Beginning Inventory = COGS

• Inventory Purchases = COGS

9. The excess of FIFO or current cost over LIFO cost of inventories is called _________________.

Answers:

• inventory valuation allowance

• cost of goods sold

• net income

• profit margin

10. Under which of the following cost flow assumptions are the costs assigned to the ending inventory the same as the costs of the earliest units acquired?

Answers:

• FIFO method

• LIFO method

• Weighted average method

• Replacement cost method

11. The difference between the selling price of an item and its replacement cost at the time of sale is the _______________.

Answers:

• cost of goods sold

• net income

• operating expense

• operating margin

12. The term "cycle counting" refers to ___________________.

Answers:

• the inventory count performed by a bicycle store

• a once-per-year inventory count

• consistently counting selected inventory items throughout the year

• a type of inventory counting performed only by auto manufacturers

13. A stock of goods owned by a firm and held for sale to customers is called _____________.

Answers:

• cost of goods sold

• FIFO

• inventory

• LIFO

14. Which of the following is a method for assigning cost in which a firm can physically match individual units sold with a specific purchase?

Answers:

• Average cost

• Weighted cost

• COGS

• Specific identification

15. The term "safety stock" _________________.

Answers:

• refers to the minimum stock that a firm must have on hand

• is the same as JIT Inventory

• refers to a "buffer stock" that is kept on hand so the firm does not run out of an item if there is an increase in demand

• refers to the inventory of safety-related items

16. Which of the following is a predetermined estimate of what each item of manufactured inventory should cost based on past cost and planned production methods?

Answers:

• Standard cost

• Average cost

• LIFO

• FIFO

17. Why wouldn't a company purchase enough inventory to last for several months at a time?

Answers:

• The per-unit cost is higher.

• Suppliers cannot meet the demand.

• There is no reason not to do so.

• Companies want to manage their cash effectively.

18. The difference between the selling price of an item and its replacement cost at the time of sale is called the _____________________.

Answers:

• operating margin

• realized holding gain

• unrealized holding gain

• gross margin

19. Which of the following is the contra account title used to record discounts for early payments for merchandise?

Answers:

• Purchase discounts

• Accounts receivable discounts

• Trade discounts

• Cost of goods sold

20. The term "distressed inventory" refers to _________________.

Answers:

• inventory that must go through a stress test

• inventory that is no longer useful or saleable

• raw materials

• finished goods

21. Inventory turnover can be calculated using _______________.

Answers:

• Average Inventory/Cost of Goods Sold

• Purchases/Sales

• Net Income/Sales

• Cost of Goods Sold/Average Inventory

22. The ________________ is the difference between the current replacement cost of the ending inventory and its acquisition cost.

Answers:

• operating margin

• realized holding gain

• unrealized holding gain

• gross margin

23. Which of the following terms sometimes denotes the realized holding gain on inventory?

Answers:

• COGS

• FIFO

• LIFO

• Inventory profit

24. At the beginning of the year, XYZ reported balances in Work in Process Inventory and Finished Goods Inventory, respectively, of $174,000 and $102,000. During the year, materials, labor, and overhead costs totaling $678,000 were added to the production. Products costing $612,000 were transferred to finished goods during the year. At the end of the year, the balance in Finished Goods Inventory is $72,000.

What amount should XYZ report as Cost of Goods Sold for the year?

Answers:

• $714,000

• $582,000

• $678,000

• $642,000

25. Under which of the following cost flow assumptions does the income statement report out-of-date cost of goods sold?

Answers:

• FIFO method

• LIFO method

• Weighted average method

• Replacement cost method

26. Conventionally, accountants refer to the difference between sales and cost of goods sold as the ______________.

Answers:

• operating margin

• realized holding gain

• unrealized holding gain

• gross margin

27. The term "inventory turnover" refers to ______________________.

Answers:

• the rotation of inventory among various locations

• a ratio used to determine how many days on average it takes to turn inventory into sales

• a form of economy of scale

• the same thing as FIFO

28. No entry is made for withdrawals from inventory until the end of the period under which of the following systems?

Answers:

• Perpetual inventory system

• Periodic inventory system

• Cash flow system

• JIT inventory system

29. The _________________ is the difference between the cost of goods sold based on replacement cost and the cost of goods sold based on acquisition cost.

Answers:

• operating margin

• realized holding gain

• unrealized holding gain

• gross margin

30. Which type of accountant works most closely with inventory?

Answers:

• Tax accountant

• General accountant

• AP clerk

• Cost accountant

31. During periods of rising prices, which of the following cost flow assumptions produces the highest reported net income?

Answers:

• FIFO method

• LIFO method

• Weighted average method

• All methods produce the same net result.

32. Stored materials that will eventually become part of the goods to be produced are called _______.

Answers:

• raw materials

• finished goods

• WIP

• COGS

33. The amount a firm would have to pay to acquire a replacement for an inventory item at a particular time is called the __________________.

Answers:

• cost of goods sold

• replacement cost

• actual cost

• average cost

34. The ______________________ is the estimated selling price of the inventory less any estimated costs for making the item ready for sale and actually selling it.

Answers:

• replacement cost

• standard cost

• net realizable value

• market selling value

35. Which of the following is NOT a characteristic of the use of current value bases to determine inventory values and cost of goods sold?

Answers:

• Current value basis shows current information that can be more useful.

• The information is generally easier to obtain.

• The information may be difficult to audit.

• None of the above

36. Partially completed products in the factory are called _________________ .

Answers:

• work in process

• finished goods

• cost of goods sold

• raw materials

37. Which of the following cost flow assumptions conforms to most actual physical inventory flows?

Answers:

• FIFO method

• LIFO method

• Weighted average method

• Replacement cost method

38. Which of the following is not a product cost?

Answers:

• Depreciation on plant machinery

• Salary of the vice president of production

• Insurance associated with the delivery equipment

• Property taxes associated with the factory building

39. Goods held for sale by a manufacturing concern are called _______________.

Answers:

• WIP

• cost of goods sold

• finished goods

• raw materials

40. Which of the following is NOT a valid characteristic of variable costing (direct costing) for inventories for manufacturing firms?

Answers:

• Production costs are classified into variable manufacturing costs and fixed manufacturing costs.

• The use of the owner's financial and income tax statements is generally accepted.

• Product costs contain only variable costs.

• Unusual patterns of income do not result because the number of units produced differs from the number of units sold.

41. The procedure in which a manufacturing firm includes all production costs as a cost of the product is called _________________.

Answers:

• standard costing

• full absorption costing

• average costing

• weighted costing

42. The inventories of a manufacturing company include __________________.

Answers:

• finished goods

• raw materials

• work in process

• All of the above

43. Which of the following cost flow assumptions leads to the deferral of income taxes during periods of rising prices?

Answers:

• FIFO

• LIFO

• Specific item

• Average cost

44. The primary benefit of cycle counting is that __________________.

Answers:

• it's less work than an annual count

• the IRS prefers it

• it eliminates the need for a year-end count of the entire inventory

• it results in higher net income

45. If the ______________ is used for income tax purposes, the Internal Revenue Service requires its use for income determination for financial reports to owners.

Answers:

• FIFO method

• LIFO method

• Weighted average method

• Replacement cost method

46. Which of the following is NOT a factor when applying the lower of the cost method or the market valuation method?

Answers:

• Replacement cost

• Net realizable value

• Standard cost

• Acquisition cost

47. Which of the following is the correct equation for determining the cost of goods sold?

Answers:

• Beginning Inventory - Purchases + Ending Inventory = Cost of Goods Sold

• Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold

• Beginning Inventory + Purchases + Ending Inventory = Cost of Goods Sold

• None of the above

48. The term "JIT Inventory" means _________________.

Answers:

• Just Info Technology Inventory

• Just In Time Inventory

• Juice Is Tasty Inventory

• Job Info Tech Inventory

49. Which of the following cost flow assumptions assigns the costs of the earliest units acquired to the withdrawals, and the costs of the most recent acquisitions to the ending inventory?

Answers:

• FIFO

• LIFO

• Average costing

• Weighted costing

50. FIFO refers to the cost of the units sold. The parallel description for ending inventory is ____________.

Answers:

• LIFO

• specific cost

• average cost

• LISH

51. Which of the following is not a period expense?

Answers:

• Salary of the vice president of sales

• Salaries of factory custodial employees

• Salaries of administrative clerical personnel

• Salaries of employees who deliver the finished product to customers

52. The term "economy of scale" refers to __________________.

Answers:

• economic equilibrium

• the lower per-unit costs that result from buying in bulk

• a measuring tool for goods with mass

• the optimal order quantity

53. The selling price less the cost of marketing equals the __________________.

Answers:

• net income

• operating expense

• net realizable value

• cash flow

54. LIFO refers to the cost flow for units sold. The parallel description for ending inventory is ____________.

Answers:

• FISH

• FIFO

• average cost

• specific identification

55. Which of the following inventory cost flow assumptions is physically appropriate for liquid or other types of products for which distinguishing different lots is difficult?

Answers:

• Specific cost

• Weighted average method

• Depletion

• Lot costing

56. From an international perspective, which of the following statements is NOT accurate?

Answers:

• Firms in most countries use FIFO and weighted average cost flow assumptions.

• All major developed countries require the lower of cost or market method.

• Few countries, except the U.S. and Japan, allow the LIFO method.

• All of the statements are accurate.

57. The _____________ is the amount a firm would have to pay to acquire a replacement for an inventory item at that a particular time.

Answers:

• replacement cost

• net realizable value

• standard cost

• market selling value

58. Which of the following inventory systems is designed so that the cost of withdrawals is recorded at the time assets are withdrawn from inventory?

Answers:

• Periodic inventory system

• Perpetual inventory system

• LIFO

• FIFO

59. The term "anticipation stock" refers to _____________________.

Answers:

• JIT inventory

• normal inventory on hand

• finished goods

• additional inventory built up for periods when demand increases

60. The Work in Process account would not be debited for which of the following items?

Answers:

• Direct labor costs

• Manufacturing overhead costs

• Selling and administrative costs

• Costs of raw materials put into production

61. For an auto manufacturer, steel would be considered ___________________.

Answers:

• COGS

• WIP

• a finished good

• a raw material

62. A predetermined estimate of what each item of manufactured inventory should cost, based on past experience and planned production methods, is called the __________________.

Answers:

• replacement cost

• net realizable value

• standard cost

• acquisition cost

63. Which of the following is the correct sequence of cost flows for a manufacturing firm?

Answers:

• Work in Process, Finished Goods, Cost of Goods Sold, Raw Materials

• Raw Materials, Work in Process, Finished Goods, Cost of Goods Sold

• Cost of Goods Sold, Raw Materials, Work in Process, Finished Goods

• Finished Goods, Work in Process, Raw Materials, Cost of Goods Sold

64. The account title and the term that designates acquisition of merchandise during the accounting period is called ___________________ .

Answers:

• selling

• purchase

• marketing

• costing

65. Under a perpetual inventory system, _______________________.

Answers:

• no entry is made as withdrawals take place

• the administration cost is usually less than under the periodic method

• a physical count of items on hand should be made from time to time

• items in inventory are usually hard to steal or pilfer

66. The primary benefit of the specific identification method of inventory costing is that ________________.

Answers:

• it results in the highest net income

• it results in the lowest tax liability

• revenues can be correctly matched to costs

• it is the easiest to track

67. For a bakery, flour would be considered _________________.

Answers:

• a work in process

• a raw material

• a finished good

• a cost of goods sold

68. Which of the following is the valuation basis that departs from cost when the utility of the goods is no longer as great as their cost?

Answers:

• Average cost

• Weighted cost

• Lower of cost or market

• Lot cost

69. The difference between cost of goods sold based on replacement cost and cost of goods sold based on acquisition cost is the ___________________.

Answers:

• cost of goods sold

• realized holding gain

• net income

• operating expense

70. Which of the following concepts states that if a firm uses a LIFO assumption in its income tax return, it must also use LIFO in its financial reports to shareholders?

Answers:

• FIFO rule

• IRS tax code

• LIFO conformity rule

• GAAP

71. The term "indirect costs" refers to _______________________.

Answers:

• costs not directly incurred in the manufacturing process but which are necessary for the operation

• costs with no specific amount

• materials costs

• finished goods

72. The procedure whereby a manufacturing firm charges the fixed production cost to the period rather than assigning it as a cost of the product is called ____________________.

Answers:

• variable (direct) costing

• indirect costing

• average costing

• specific costing

73. Which of the following costs would not be included as an element of manufacturing overhead?

Answers:

• Depreciation on factory machinery

• Insurance on factory building

• Raw materials

• Supervisory labor

74. In cash flow statements, reductions in inventory ___________________.

Answers:

• are treated differently than other reductions in current assets

• appear as an addition to net income in deriving cash flow from operations

• appear in the financing section

• appear in the investing section

75. Variable costing (direct costing) is acceptable for use in determining inventory cost by _________________.

Answers:

• the Financial Accounting Standards Board

• the Internal Revenue Service

• either a or b

• neither a nor b

76. Which of the following is NOT a characteristic of the LIFO method?

Answers:

• During periods of rising prices, LIFO produces higher balance-sheet valuation of inventory than FIFO.

• During periods of rising prices, LIFO produces lower net income than FIFO.

• LIFO allows managers to manipulate net income.

• All of the above are characteristics of the LIFO method.

77. At the beginning of the year, XYZ reported balances in Work in Process Inventory and Finished Goods Inventory, respectively, of $174,000 and $102,000. During the year, materials, labor, and overhead costs totaling $678,000 were added to the production. Products costing $612,000 were transferred to finished goods during the year. At the end of the year, the balance in Finished Goods Inventory is $72,000.

What is the ending balance in the Work in Process Inventory account?

Answers:

• $240,000

• $222,000

• $102,000

• $144,000

78. The difference between the current replacement cost of the ending inventory and its acquisition cost is the ________________.

Answers:

• cost of goods sold

• actual cost

• average cost

• unrealized holding gain