Which of the Following Statements Best Describes an Inherent Limitation

question 45

Multiple Choice

Which of the following statements best describes an inherent limitation of the monetary-unit sampling method?

• A)It can only be used for substantive testing of asset accounts.
• B)It requires the use of a computer system to perform the required calculations.
• C)Misstatement rates must be large and the misstatements must be overstatements.
• D)Misstatement rates must be small and the misstatements must be overstatements.

---

Definitions:

Variable Manufacturing Cost

Costs in manufacturing that vary with the level of output, including costs such as raw materials and direct labor.

Unit Product Cost

The total cost (direct materials, direct labor, and manufacturing overhead) associated with producing one unit of a product.

Reduced Price

The selling price of a product or service after it has been discounted from the original or standard price.

Annual Financial Advantage

Annual Financial Advantage refers to the financial benefit realized on an annual basis from a particular investment or decision.