Inventory Is Often a Significant Part of a Company's Current

question 58

Multiple Choice

Inventory is often a significant part of a company's current assets. Because of its importance,

• A) auditors are required by auditing standards to observe the client taking a physical inventory count.
• B) price tests must be performed to verify whether the physical counts were correctly summarized.
• C) companies are required to use perpetual inventory systems.
• D) auditors are required by auditing standards to take the physical inventory for the client.

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Definitions:

Time-Driven Activity-Based Costing

An accounting method that assigns costs to products or services based on the actual time activities consume, improving accuracy in costing.

Capacity Analysis

A technique used to determine the production capacity needed by an organization to meet changing demands for its products.

Customer Service Department

A specialized division within a company that handles inquiries, resolves issues, and maintains positive relationships with customers.

Time-Driven Activity-Based Costing

A method of costing that assigns costs to products or services based on the actual time taken to produce or provide them, rather than on estimated absorption rates.