Inventory Management and Accounting Questions

inventory management quiz

Practice these questions for Inventory management, analysis, costing, accounting and valuation:

Ques. ABC Analysis is used in
(a) Inventory Management
(b) Receivables Management
(c) Accounting Policies
(d) Corporate Governance
Ans. (a)

Ques. Inventory Turnover measures the relationship of inventory with:
(a) Average Sales
(b) Cost of Goods Sold
(c) Total Purchases
(d) Total Assets
Ans. (b)

Ques. Inventory holding cost may include
(a) Material Purchase Cost
(b) Penalty charge for default
(c) Interest on loan
(d) None of the above
Ans. (d)

Ques. Cost of inventory is a sum of
(a) Cost of purchase and cost of conversion
(b) Direct cost, indirect cost and other cost
(c) Cost of purchase, cost of conversion and other cost to bring the material to the present location
(d) None of these
Ans. (c)

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Ques. Which of the following is true for a company which uses continuous review inventory system
(a) Order Interval is fixed
(b) Order Interval varies
(c) Order Quantity is fixed
(d) Both (a) and (c) 224
Ans. (b)

Ques. EOQ determines the order size when
(a) Total Order cost is Minimum
(b) Total Number of order is least
(c) Total inventory costs are minimum
(d) None of the above
Ans. (c)

Ques. Inventory is generally valued as lower of
(a) Market Price and Replacement Cost
(b) Cost and Net Realizable Value
(c) Cost and Sales Value
(d) Sales Value and Profit
Ans. (b)

Ques. Cost of inventory does not include
(a) Salary of factory staff
(b) Storage cost necessary in the production process
(c) Cost of abnormal wastage
(d) None refundable taxes
Ans. (c)

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Ques. In Inventory Turnover calculation, what is taken in the numerator?
(a) Sales
(b) Cost of Goods Sold
(c) Opening Stock
(d) Closing Stock

Ques. EOQ is the quantity that minimizes
(a) Total Ordering Cost
(b) Total Inventory Cost
(c) Total Interest Cost
(d) Safety Stock Level
Ans. (a)

Ques. A firm has inventory turnover of 6 and cost of goods sold is 7,50,000. With better inventory management, the inventory turnover is increased. This would result in:
(a) Increase in inventory by 50,000
(b) Decrease in inventory by 50,000
(c) Decrease in cost of goods sold
(d) Increase in cost of goods sold
Ans. (b)

Ques. Cost of not carrying sufficient inventory is known as
(a) Carrying Cost
(b) Holding Cost
(c) Total Cost
(d) Stock-out Cost
Ans. (d)

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Ques. What is Economic Order Quantity?
(a) Cost of an Order
(b) Cost of Stock
(c) Reorder level
(d) Optimum order size
Ans. (d)

Ques. In ABC inventory management system, class A items may require
(a) Higher Safety Stock
(b) Frequent Deliveries
(c) Periodic Inventory system
(d) Updating of inventory records
Ans. (a)

Ques. Use of safety stock by a firm would
(a) Increase Inventory Cost
(b) Decrease Inventory Cost
(c) No effect on cost
(d) None of the above
Ans. (a)

Ques. Inventory allocated to the construction of fixed asset should be __
(a) Capitalized
(b) Expensed
(c) Reduced from value of inventory
(d) None of these
Ans. (a)

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Ques. ABC Analysis is useful for analyzing the inventories:
(a) Based on their Quality
(b) Based on their Usage and value
(c) Based on Physical Volume
(d) All of the above
Ans. (b)

Ques. Which of the following is not a benefit of carrying inventories
(a) Reduction in ordering cost
(b) Avoiding lost sales
(c) Reducing carrying cost
(d) Avoiding Production Shortages
Ans. (c)

Ques. Which of the following is not included in cost of inventory?
(a) Purchase cost
(b) Transport in Cost
(c) Import Duty
(d) Selling Costs
Ans. (d)

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Ques. Which of the following is not a standard method of inventory valuation?
(a) First in First out
(b) Standard Cost
(c) Average Pricing
(d) Realizable Value
Ans. (c)

What is inventory management?

What do you do with the products you sell? Managing your inventory is a critical process in your business. The first step is to identify which items need to be ordered and when. Then, you track your stock from purchase to sale, and respond to trends. Once an item is sold, it becomes revenue for your business. But before you can sell it, you must have it. That’s where inventory management comes in. Keeping too much stock costs you money and reduces your cash flow.

What is the need of an Inventory Management System?

If you’re just getting started, you should consider upgrading to a more advanced inventory management solution. An all-in-one system provides accurate, cross-organisational data. All departments will be able to communicate with each other automatically, and your business will be more efficient overall. These systems can be expensive, but they are worth it in the long run. You’ll save money over time with a system that is customized to your business needs.
In addition to reducing stock levels, inventory management can increase the availability of your products. It can also improve your revenue and free up cash flow. It can also help you forecast your customer’s purchasing patterns and anticipate your needs. With proper inventory management, you can save money, improve your revenue, and reduce risk. You’ll also be able to eliminate time and errors from your business. So, what is inventory management? The right tools to manage your stock.

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Vishal Arora

MBA from one of the best universities in India Vishal is our marketing guy with experience of 10+ years. He always inspires and empowers to explore more about in-depth topics in marketing, sales and entrepreneurship.

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