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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Definitions:

Cultural Eutrophication

The process by which a water body becomes overly enriched with minerals and nutrients (mainly from runoff) leading to an explosion in algae growth, which can deplete oxygen levels in water bodies.

Advanced Waste

Waste products that have undergone sophisticated treatment or processing, often to reduce toxicity or enhance disposability.

Sewage Discharge

The release of wastewater from domestic, commercial, or industrial sources into the environment, often requiring treatment to remove contaminants.

Point-Source Pollution

Pollution that originates from a single, identifiable source, such as a pipe, ditch, or factory smokestack.