XYZ Company Uses Standard Costs for Allocating Costs to Work-In-Process

question 36

Multiple Choice

XYZ Company uses standard costs for allocating costs to work-in-process and finished goods inventory.What internal control is required with respect to these costs to ensure proper valuation of inventory?

• A)Procedures must be designed to keep the standards updated for changes in production processes and costs.
• B)Computer software should be used to make sure that the standard costs are properly updated into the inventory item master file.
• C)Input edit routines should be used to help detect input data entry errors for the entry of the standard costs.
• D)Standard costs should be used to provide a value for inventory every month by calculating cost times quantity on hand.

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Definitions:

Net Operating Income

The total revenue from operations minus the operating expenses, exclusive of taxes and interest, in a different phrasing.

Variable Manufacturing Overhead

Costs of manufacturing that vary directly with the level of production, such as utilities for the manufacturing plant.

Break-even Sales

The amount of revenue needed to cover all fixed and variable costs, resulting in neither profit nor loss.

Southern Division

A geographical or organizational subsection of a company that operates in the southern region.