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A Manufacturer Uses Improved Linkage Between Order Entry, Production, and Shipping

question 122

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A manufacturer uses improved linkage between order entry, production, and shipping to reduce raw materials and work-in-process inventory. Which type of fraud will these changes likely reduce?


Definitions:

Machine-Hours

A measure of production time, referring to the total hours a machine is operated within a specific period.

Predetermined Overhead Rate

An estimated charge per unit of activity used to allocate manufacturing overhead costs to products.

Job-Order Costing

An accounting method used to track costs specifically associated with a given job or project.

Machine-Hours

A metric for the amount of time a machine is operated, used as a basis for allocating manufacturing overhead costs.

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