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Base Stock Method - Methods of Valuing Material Issues from Cost Accounting Video Lecture | Commerce & Accountancy Optional Notes for UPSC

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FAQs on Base Stock Method - Methods of Valuing Material Issues from Cost Accounting Video Lecture - Commerce & Accountancy Optional Notes for UPSC

1. What is the Base Stock Method in cost accounting?
Ans. The Base Stock Method is a method of valuing material issues in cost accounting where the stock level is maintained at a predetermined base level, and any material issued is immediately replaced to maintain that base stock level.
2. How is the Base Stock Method different from other methods of valuing material issues?
Ans. The Base Stock Method differs from other methods like FIFO or LIFO in that it focuses on maintaining a constant stock level by immediately replacing any material that is issued, rather than following a specific order of issuing materials.
3. What are the advantages of using the Base Stock Method in cost accounting?
Ans. Some advantages of using the Base Stock Method include better control over stock levels, reduced risk of stockouts, and simplification of inventory management processes.
4. What are the limitations of the Base Stock Method?
Ans. Limitations of the Base Stock Method include the potential for overstocking if material issues are not accurately tracked, and the risk of tying up capital in maintaining a constant stock level.
5. How can companies effectively implement the Base Stock Method in their cost accounting practices?
Ans. To effectively implement the Base Stock Method, companies should establish accurate tracking systems for material issues, set appropriate base stock levels based on demand forecasts, and regularly review and adjust these levels as needed.

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