Why purchase requisition is raised?

Purchase requisitions are used when a procurement staff needs to make a purchase or an order request on behalf of their organization. It is a request raised to inform department managers or the purchasing officer of the decision so that the procurement department can start the buying process.

What is Material Cost?

The cost of material used at the basic input in a process of production of any good is known as the Material Cost. Material Cost is bifurcated as direct Material Cost and indirect Material Cost.

How do you calculate the Direct Material Cost?

Formula: prime cost = raw material consumed + direct labour + direct expenses

What are examples of Material Cost?

They include things like rags used in constructing a house, thread used to stitch clothing together, and the lubricants or oil used on the machines that create the products or services.

What are the uses of Material Costing?

Material costs constitute a significant proportion of the overall cost of a product and should be kept within reasonable parameters. By utilizing scientific purchasing strategies, manufacturers can obtain materials at reasonable prices. By observing proper storage and conservation measures, manufacturers can reduce losses due to spoilage, thereby keeping cost content under control and leading to the production of high-quality products at reasonable cost.

Material Costing MCQ Quiz With Answers

Test your knowledge with this multiple choice question (MCQ) quiz on material costing. The quiz is helpful for students to clarify key concepts and prepare for exams or interviews. This quiz contains 14 MCQs. Each question has 4 options and you'll need to choose the 1 correct option. The results will be shown after you answer the questions and submit the quiz.

1. Which of the following is the correct valuation base for finished goods stock for balance sheet valuation purposes?

Prime cost per unit
Production cost per unit
Production margin per unit
Total cost per unit

2. A perpetual inventory system is:

A system for checking physical stock against bin card information on a continuous basis.
A documentation system that records all transactions in the storage department on a continuous basis.
A system for checking stock on the same date in each accounting period.
A system for ensuring that stock-taking procedures satisfy a predetermined process.

3. Which of the following does not usually appear on a GRN?

Date received
Price of goods
Quantity received
Description of goods

4. A purchase requisition is raised:

To intimate to the supplier the quantity and quality of new material required
When the stock of a raw material has fallen to the re-order level
When goods are received from a supplier
To let the accounts department know that an invoice should be expected from a supplier

5. If raw materials prices are inflated, which of the following stock valuation methods will show the lowest gross profit?

Last In, First Out (LIFO)
First In, First Out (FIFO)
Replacement Cost
Simple Average

6. Which of the following is a disadvantage of the FIFO method of stock valuation?

Physical issues must follow the same order as physical receipts
One issue may be split between two or more different deliveries for costing purposes
Jobs started on the same day must be issued with stock from the same delivery
It is necessary to analyze deliveries that specific issues have been obtained from

7. The re-ordering quantity that may be measured is:

Weighted Average Cost
Standard Cost
FIFO
LIFO

8. Which of the following source documents in a cost accounting system is designed to exercise control over the delivery and accurate recording of receipts of goods?