In Audits of Companies in Which Payroll Is a Significant

question 19

Multiple Choice

In audits of companies in which payroll is a significant portion of inventory, the improper account classification of payroll can

Calculate the book value of assets using various methods of depreciation.

Compute the depreciation expense for specific periods using the double-declining-balance method.

Apply the sum-of-the-years-digits method of depreciation.

Calculate depreciation expense using the straight-line method.

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Definitions:

Actual Variable Costs

Expenses that vary directly with the level of production or sales volume.

Planned Variable Costs

The forecasted variable expenses that change in proportion to the activity of a business.

Budgeted Activity Level

An estimate of the amount of production, sales, or other activity for a particular period, used for budgeting and planning processes.

Static Budget

A fixed budget that does not change or adjust in response to variations in business activity levels throughout the budget period.