MI – May 2021 – L1 – SB – Q3b – Cost Classifications

List factors influencing the choice of methods for pricing materials issued to production.

Question

List SIX factors to be considered in choosing methods of pricing material issued to production.

Answer

The nature of the business undertaken by the company.
Frequency or changes in price level of bought-in materials and components (price stability).
The ratio of materials costs to total costs.
Differences in the volume of discount.
The need for uniformity within an organization.
The system of cost accounting in operation in the organization (historical or standard).