Mock Exam
Cost Classification, Source Documentation, and Inventory Valuation
1. Which of the following is an example of a fixed cost?
A. Direct materials
B. Factory rent
C. Direct labor
D. Packaging
2. A cost that varies in direct proportion to the level of activity is called:
A. Fixed cost
B. Step cost
C. Variable cost
D. Semi-variable cost
3. Costs that can be directly traced to a specific cost object are known as:
A. Indirect costs
B. Overhead costs
C. Direct costs
D. Fixed costs
4. Which of the following is not a period cost?
A. Advertising expenses
B. Office salaries
C. Factory maintenance
D. Rent of the sales office
5. A semi-variable cost includes:
A. Only fixed elements
B. Only variable elements
C. Both fixed and variable elements
D. None of the above
6. A non-controllable cost is one that:
A. Can be changed in the short term
B. Cannot be influenced by the manager in the short term
C. Can be directly traced to a cost object
D. Changes with the level of activity
7. Prime cost includes:
A. Direct materials and factory overheads
B. Direct materials, direct labor, and direct expenses
C. Direct materials and indirect labor
D. Factory overheads and direct labor
8. A material requisition form is used to:
A. Record the quantity of materials issued to production
B. Summarize all materials purchased during a period
C. Determine selling prices
D. Record labor hours
9. Which document is issued by a seller to reduce the amount owed by a buyer?
A. Debit note
B. Credit note
C. Purchase invoice
D. Sales invoice
10. Which of the following is not considered a source document?
A. Delivery note
B. General ledger
C. Sales invoice
D. Bank statement
11. What is the primary function of a purchase order?
A. To request payment from customers
B. To authorize the purchase of goods or services
C. To record goods dispatched to customers
D. To summarize total purchases in a period
12. Which of the following best describes the FIFO inventory valuation method?
A. Inventory is valued based on the cost of the most recent purchases.
B. Inventory is valued based on the cost of the oldest purchases.
C. Inventory is valued at the average cost of all items available for sale.
D. Inventory is valued at the lower of cost or net realizable value
13. Under the weighted average method, inventory is valued at:
A. The oldest cost
B. The latest cost
C. The average cost of all items available for sale
D. The highest cost
14. Which method matches inventory cost closely with the current market price?
A. LIFO
B. FIFO
C. Weighted average
D. Standard cost
15. A physical inventory count is required under:
A. Both perpetual and periodic systems
B. Perpetual system only
C. Periodic system only
D. Neither system
16. Which document is essential to confirm the receipt of goods that were ordered by a business?
A. Sales invoice
B. Delivery note
C. Goods received note (GRN)
D. Purchase requisition
17. n the weighted average inventory method, the new unit cost after a purchase is calculated by:
A. Adding the cost of the new inventory to the total cost of old inventory and dividing by the
new total units available.
B. Taking the cost of the newest inventory batch.
C. Dividing the total cost of beginning inventory by total units available.
D. Subtracting total cost of sold inventory from total inventory cost.
18. A factory supervisor's salary is classified as which type of cost?
A. Direct and fixed
B. Indirect and fixed
C. Direct and variable
D. Indirect and variable
19. A debit note is typically issued by:
A. The seller to the buyer for returned goods
B. The buyer to the seller for returned goods
C. The bank for cash transactions
D. The auditor for discrepancie
20. The primary purpose of a purchase requisition is to:
A. Authorize payment for goods received
B. Request goods or services from an external supplier
C. Record goods returned to a supplier
D. Approve production orders
21) A factory uses the LIFO method to calculate the cost of inventory issued to
production. The following details are the opening inventory for May X4.
125 kg @ $10.50/kg purchased on 03/04/X4
75 kg @ $11.25/kg purchased on 15/04/X4
150 kg of material were issued to production during May X4 in three equal amounts on
the 5th, 12th and 19th of May, i.e. 50kg in each issue.
The factory purchased 175 units @ $10.00/kg on 02/05/X4
. What is the total value of closing inventory on 31/05/X4?
A.$2,250.00
B.$2,312.50
C.$2,362.50
D.$2,406.25
22) Question
A company purchased 40 units of inventory at $6/unit, followed by another 60 units at
$8/unit. The company then issued 40 units to production.
What values would be placed on the issue to production under the FIFO, LIFO
and Weighted average methods?
Weighted
FIFO LIFO average
A $240 $320 $280
B $320 $240 $288
C $240 $320 $288
D $320 $240 $280
23) A factory warehouse holds a constant buffer inventory plus any surplus inventory
from the current month’s purchases. Prices have fallen since the buffer inventory was
purchased.
The value of closing inventory will depend on which inventory costing method the
factory uses.
Which option lists the methods of pricing closing inventory in order of
decreasing value?
[Link], FIFO, weighted average
[Link], LIFO, weighted average
[Link], weighted average, LIFO
[Link], weighted average, FIFO
24)A factory uses the LIFO method to calculate the cost of inventory issued to
production. The following details relate to the inventory movements during November.
Opening Inventory 10 units @ $2.20/unit purchased
Purchases 15 units costing $39 on 12th November
20 units costing $50 on 20th November
15 units costing $33.75 on 25th November
Issued to production 5 units on 10th November
15 units on 15th November
10 units on 22nd November
. What is the total value of the units issued to production during November?
A.$75.00
B.$73.50
C.$71.25
D.$67.50
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Question
The following information relates to raw material X.
Date Units Unit price $ Value $
Balance
1 Jan b/f 100 4.00 400
4 Jan Receipt 50 5.00 250
6 Jan Receipt 50 6.00 300
7 Jan Issue 70
12. Under the LIFO inventory valuation method, what is the value of the issue on 7
January?
A.$420
B.$350
C.$400
D.$280
