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Material Cost Control Interview Questions & Answers - Learning Mode

Material Cost Control Interview Questions & Answers - Learning Mode

Material cost control is the level of material maintenance so as to ensure uninterrupted production and minimizing the investment of funds. Materials cost is one of the important elements of cost of product or unit. It constitutes a substantial proportion of the total cost of production. For material cost control purposes, it is very essential to know them important aspects of material, material control and material purchase control.

Try Material Cost Control Interview Questions & Answers - Exam Mode

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Material Cost Control Interview Questions & Answers - Learning Mode
Try Material Cost Control Interview Questions & Answers - Exam Mode
Question: What is material cost?

Answer: ?Material control is a systematic control over purchasing, storing and consumption of materials, so as to maintain a regular and timely supply of materials, at the same time, avoiding overstocking.? Source:
Question: What is minimum level?

Answer: It represents the lowest quantity of a particular material below which stock should not be allowed to fall. This level must be maintained at every time so that production is not held up due to shortage of any material.It is that level of inventories of which a fresh order must be placed to replenish the stock.This level is usually determined through the following formula:
Minimum Level = Re-ordering level ?
(Normal rate of consumption x Normal delivery period). Source:
Question: What do you understand by store keeping?

Answer: According to Alford and Beatty ?store keeping is that aspect of material control concerned with the physical storage of goods.? In other words,store keeping relates to art of preserving raw materials, work-in-progress and finished goods in the stores. Source:
Question: What is Perpetual Inventory System?

Answer: In business and accounting/accountancy, perpetual inventory or continuous inventory describes systems of trading stock where information on inventory quantity and availability is updated on a continuous basis as a function of doing business.
Question: What are the objectives of material cost?

Answer: The various objectives of material cost are as follows:
(a) To enable uninterrupted production.
(b) To ensure requisite quality of materials.
(c) To minimise wastage.
(d) To fix responsibility.
(e) To provide information. Source:
Question: State the difference between perpetual and periodic inventory system?

Answer: In perpetual inventory system, merchandise inventory and cost of goods sold are updated continuously on each sale and purchase transaction.
In periodic inventory system, merchandise inventory and cost of goods sold are not updated continuously.
Question: What is Economic Order Quantity?

Answer: A problem which always remains in that how much material may be ordered at a time. An industry making bolts will definitely would like to know the length of steel bars to be purchased at any one time.This length is called ?economic order quantity? and an economic order quantity is one which permits lowest cost per unit and is most advantages. Source:
Question: Name the types of purchases.

Answer: a)Personal Purchases
b)Mercantile Purchasing
c)Industrial Purchasing
d)Institutionalised or government purchasing Source:
Question: What is maximum level?

Answer: Maximum level is the level above which stock should never reach. It is also known as ?maximum limit? or ?maximum stock?. The function of maximum level is essential to avoid unnecessary blocking up of capital in inventories, losses on account of deterioration and obsolescence of materials,extra overheads and temptation to thefts etc. This level can be determined with the following formula.
Maximum Stock level = Reordering level + Reordering quantity ?(Minimum Consumption x Minimum re-orderin Source:
Question: What is VED Analysis?

Answer: Vital essential and desirable analysis is used primarily for the control of spare parts. The spare parts can be divided into three categories:
(i) Vital:The spares the stock out of which even for a short time will stop production for quite some time and future the cost of stock out is very high are known as vital spares.
(ii) Essential:The spare stock out of which even for a few hours of days and cost of lost production is high is called essential.
(iii) Desirable:Spares are those which Source:
Question: How is Average Stock Level determined?

Answer: Average stock level is determined by averaging the minimum and maximum level of stock.The formula for determination of the level is as follows:
Average level =1/2 (Minimum stock level + Maximum stock level)
This may also be expressed by:
Minimum level + 1/2 of Re-ordering Quantity.
Question: What is the necessity and importance of material control?

Answer: a)For knowing proper cost of production, control over materials is indispensable.
b)Certain techniques and methods are developed under the system of materials control thereby ensuring optimum utilisation of materials.
c)In order to undertake continuous checking of materials, the necessity of a proper system of materials control cannot be ignored.
d)A well managed system of materials control ensures the availability of different kinds of materials without delay. Source:
Question: What is industrial purchasing?

Answer: The purchaser is buying to convert material into finished product. It entails buying raw materials. Components,supplies and consumable stores,spares and tools,machines and equipment and office appliance. Source:
Question: What is the difference between centralized and decentralized storage?

Answer: Centralized storage means a single store for the whole organisation, whereas decentralized storage means independent small stores attached to various departments. Source:
Question: What is Danger Level and how is it calculated?

Answer: Danger level is that level below which the stock should under no circumstances be allowed to fall. Danger level is slightly below the minimum level and therefore the purchases manager should make special efforts to acquire required materials and stores.This level can be calculated with the help of following formula:
Danger Level =Average rate of consumption x Emergency supply time. Source:
Question: Name the two types of storage.

Answer: a)Centralized storage
b)Decentralized storage.
Question: What does Inventory Turnover ratio indicates?

Answer: The ratio indicates how quickly the inventory is used for production. Higher the ratio, shorter will be the duration of inventory at the factory. It is the index of efficiency of material management.
Question: What is personal purchases?

Answer: The consumer purchases for the consumption of themselves, then they fall into this very important category class.They are ultimately are driving the economy through the purchase of its products. Therefore, the economy becomes dependent on them. Source:
Question: What do you understand by just- in- time?

Answer: Just-in-time (JIT) is an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process,thereby reducing inventory costs. This method requires producers to forecast demand accurately. Source:
Question: How is Economic Order Quantity calculated?

Answer: Q = v2AS/I
where; Q stands for quantity per order ;
A stands for annual requirements of an item in terms of rupees;
S stands for cost of placement of an order in rupees; and
I stand for inventory carrying cost per unit per year in rupees. Source:

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