When Auditing Manufacturing Overhead Costs Assigned to Inventory, Auditors Should

question 15

Multiple Choice

When auditing manufacturing overhead costs assigned to inventory, auditors should keep in mind that

• A) GAAP has strict procedures that must be followed when assigning overhead to work-in-process inventory.
• B) overhead costs must be allocated to raw materials, work-in-process, and finished goods inventory.
• C) management typically allocates overhead using total direct labor dollars as the basis for the allocation.
• D) determining the reasonableness of the allocation method is relatively simple for work-in-process inventory.

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