ST.

VINCENT COLLEGE OF CABUYAO

Brgy. Mamatid, City of Cabuyao
Laguna 4025
Name: _________________________________________ Score: __________
Section: ________________________________________ Mr. J. F. E. Ambas, CPA

Midterm Exam – Accounting for Materials

True or False.

________ 1. When prices are rising, higher income will be reported using FIFO as compared with using LIFO.
________ 2. Inventory methods can be changed at will to control reported net income.
________ 3. An overstated ending inventory leads to understated net income.
________ 4. An error in determining the cost of the ending inventory of a period generally results in misstated income for two
periods.
________ 5. The net realizable value of an inventory item can never be greater than its expected selling price.
________ 6. An advantage of using LIFO yields the greatest cost of goods sold.
________ 7. Spoiled goods may be sold at an amount higher than the regular sales price.
________ 8. If spoilage in a job results is due to the exacting specifications of the job, the loss resulting from the spoiled goods
should be shared by all units manufactured during the period.
________ 9. The closing entries necessary under the perpetual and periodic inventory system do not differ because all expenses
and revenues must be closed.
________ 10. When a company changes from one inventory costing method to another, the change must be fully disclosed in a
footnote to the financial statements explaining the reason for the change.
________ 11. Graphically, the economic order quantity (EOQ) is the point where the carrying cost line intersect the ordering cost
line.
________ 12. The primary goal of inventory management activity is to minimize the risk of a stock out while maximizing the return of
inventory.
________ 13. When computing the economic production run size, the costs to set up a production run are analogous to the carrying
costs in the basic economic order quantity model.
________ 14. The purchase price per unit of inventory is irrelevant in lathe economic order quantity (EOQ) model.
________ 15. The accounting for spoiled units and defective unit is the same.