Ron Notices That There Are No Safeguards Over Company Inventory

question 124

Multiple Choice

Ron notices that there are no safeguards over company inventory, and tells himself that the company is probably going to write the inventory off as obsolete anyway. However, he doesn't really need the inventory. Because there is no ________, Ron is less likely to commit fraud.

• A)perceived pressure
• B)rationalization
• C)perceived opportunity
• D)internal controls

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Definitions:

Variable Production Costs

Costs that change in direct proportion to changes in the level of production, such as raw materials and hourly labor.

Fixed Production Costs

Expenses that do not change with the level of production or sales over a short period, such as rent, salaries, and insurance, ensuring stability in production costs despite output variations.

Net Income

The total profit of a company after accounting for all costs and expenses, including taxes, interest, and depreciation.

Direct Materials

Raw materials that are directly traceable and allocable to a finished product in the manufacturing process.