The Principle of Lower of Cost or Market and the Potential

question 78

Multiple Choice

The principle of lower of cost or market and the potential obsolescence of inventory are a concern for the audit team because of which of the following?

• A) They are uncommon and may not exist.
• B) They are a burden to the auditor in the undue amount of work caused.
• C) They are likely to occur in the last month of the year and cause cutoff problems.
• D) They are an inherent component of complexity related to valuation.

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Definitions:

Consumption Function

An economic formula representing the relationship between total consumption and gross national income.

Marginal Propensity to Save

The fraction of an increase in income that is saved by an individual or population, representing how savings change with changes in disposable income.

Consumption Function

The consumption function is an economic formula that represents the relationship between total consumption and gross national income, predicting consumer spending.

Marginal Propensity to Consume

The ratio of change in consumption to the change in disposable income, indicating how much income will be spent rather than saved.