When Allocating Performance Materiality

question 113

Multiple Choice

When allocating performance materiality,

• A) it is easy to predict in advance which accounts are most likely to be misstated.
• B) only overstatements need to be considered.
• C) professional judgment is critical.
• D) the sum of all the performance materiality levels cannot exceed the preliminary judgment about materiality.

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Definitions:

Overhead Applied

The assigning of overhead costs to goods produced based on a predetermined rate or basis such as machine hours or labor hours.

Activity-Based Costing

An accounting technique that tags and apportions the costs of organizational activities to every product and service in line with their real consumption.

Activity Rate

The predetermined rate used to allocate overhead costs to products or services based on a specific activity measure, such as machine-hours or labor-hours.

Labor-Related Activity

Activities or tasks that directly involve or are associated with the workforce's efforts in the production process or service delivery.