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B Com Exam  >  B Com Tests  >  Test: Material Costs - B Com MCQ

Test: Material Costs - B Com MCQ


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10 Questions MCQ Test - Test: Material Costs

Test: Material Costs for B Com 2024 is part of B Com preparation. The Test: Material Costs questions and answers have been prepared according to the B Com exam syllabus.The Test: Material Costs MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Material Costs below.
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Test: Material Costs - Question 1
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What is the primary purpose of classifying materials in the material purchase procedure?

Detailed Solution for Test: Material Costs - Question 1
Classifying materials in the material purchase procedure serves the primary purpose of ensuring smooth and uninterrupted production. By categorizing materials based on their nature, such as raw materials, machines, tools, or other materials, the purchase department can effectively manage the procurement and distribution of these materials to support ongoing production processes.
Test: Material Costs - Question 2
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Which method of material pricing is useful when material prices are fluctuating and there is a need to hedge against inflation?

Detailed Solution for Test: Material Costs - Question 2
The Last-In First-Out (LIFO) method is useful when material prices are fluctuating, and there is a need to hedge against inflation. This method assumes that the most recently purchased materials are the first to be used, allowing for the pricing of materials at their more recent and often higher market prices.
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Test: Material Costs - Question 3
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What is the FIFO method used for in material pricing?

Detailed Solution for Test: Material Costs - Question 3
The FIFO (First-In First-Out) method is used for pricing materials based on their oldest purchase price. This means that materials that were received into stock first are assumed to be the first materials used, and their purchase price is applied when calculating the cost of materials issued. This method helps in maintaining a chronological order of material usage.
Test: Material Costs - Question 4
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What is the main objective of materials control in an organization?
Detailed Solution for Test: Material Costs - Question 4
The primary objective of materials control in an organization is to minimize wastage and losses of materials. This involves implementing systematic measures to ensure that materials are handled, stored, and used efficiently, reducing the unnecessary loss of valuable resources.
Test: Material Costs - Question 5
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Which material pricing method involves calculating a weighted average price after each receipt of materials?
Detailed Solution for Test: Material Costs - Question 5
The Weighted Average Cost Method involves calculating a weighted average price after each receipt of materials. This method considers both the total quantities and total cost when determining the average price for materials issued, leading to a smoother pricing approach.
Test: Material Costs - Question 6
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What is the advantage of using the Replacement Cost Method for material pricing?
Detailed Solution for Test: Material Costs - Question 6
The Replacement Cost Method provides an advantage by offering a hedge against inflation. By pricing materials at their replacement cost, it ensures that the inventory value reflects current market prices, helping organizations mitigate the impact of rising prices on their material costs.
Test: Material Costs - Question 7
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Under which method of material pricing is the cost of materials issued based on a predetermined standard price?
Detailed Solution for Test: Material Costs - Question 7
The Standard Cost Method involves pricing materials based on a predetermined standard price set by management before the actual material costs are known. This method provides consistency in material pricing and allows for straightforward cost comparisons.
Test: Material Costs - Question 8
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In which method of material pricing are materials issued at the most recent market price?
Detailed Solution for Test: Material Costs - Question 8
In the Last-In First-Out (LIFO) Method, materials are issued at the most recent market price. This method assumes that the most recently purchased materials are the first to be used, allowing for the pricing of materials based on their more recent purchase cost.
Test: Material Costs - Question 9
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What is the primary goal of material control in an organization?
Detailed Solution for Test: Material Costs - Question 9
The primary goal of material control in an organization is to ensure smooth and uninterrupted production. By effectively managing the procurement, storage, and usage of materials, organizations can prevent production stoppages and delays, which can lead to increased efficiency and profitability.
Test: Material Costs - Question 10
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Why is the Base Stock Method considered unrealistic for stock valuation?
Detailed Solution for Test: Material Costs - Question 10
The Base Stock Method is considered unrealistic for stock valuation because it does not reflect actual market prices. This method involves pricing a specified quantity of materials at their original cost as base stock, regardless of the current market conditions, which can lead to inaccurate valuations of materials in stock.
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