The Primary Concern in Measuring Materiality When a Client Has

question 55

Multiple Choice

The primary concern in measuring materiality when a client has failed to follow an accounting standard is usually:

• A) measurability of the dollar error.
• B) the total dollar error in the accounts involved, compared with some base.
• C) the nature of the item in error.
• D) whether it can materially affect some future period.

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Definitions:

Variable Cost

Costs that change in proportion to the level of goods or services a business produces.

Fixed Costs

Fixed costs, including expenses like leasing fees, employee payments, and insurance, are unaffected by variations in manufacturing or sales volumes.

Manufacturing Cost Schedule

A detailed report outlining the total cost associated with producing a product, including direct labor, direct materials, and overhead costs.

Relevant Range

The range of activity within which the assumptions about variable and fixed cost behavior hold true.