Which of the Following Is an Analytical Procedure That Should

question 5

Multiple Choice

Which of the following is an analytical procedure that should be applied to the income statement?

• A)Select sales and expense items and trace amounts to related supporting documents.
• B)Ascertain that the net income amount in the statement of cash flows agrees with the net income amount in the income statement.
• C)Obtain from the proper client representatives,the beginning and ending inventory amounts that were used to determine costs of sales.
• D)Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences.

---

Definitions:

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected to produce a certain amount of goods, multiplied by the standard labor rate.

Direct Labor

Direct labor refers to the wages and salaries paid to employees directly involved in the production of goods or services.

Standard Labor Cost

The predetermined cost of labor that is expected for manufacturing a product or performing a service, used for budgeting and performance evaluation purposes.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost expected, used to assess labor cost efficiency.