Which of the Following Procedures Would Best Detect the Theft

question 72

Multiple Choice

Which of the following procedures would best detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10, and a few items selling for hundreds of dollars?

• A)Have an independent audit firm prepare an internal control structure report on the effectiveness of the controls over inventory.
• B)Maintain perpetual inventory records with frequent periodic verification of the accuracy of these records.
• C)Require an authorised officer's signature on all requisitions for the more valuable items.
• D)Have separate warehouse space for the more valuable items with sequentially numbered tags.

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Definitions:

Manufacturing Overhead

Manufacturing expenses not directly linked to individual product units, encompassing indirect materials and labor.

Predetermined Overhead Rate

An estimated rate used to assign manufacturing overhead costs to products based on a specific activity base, like machine hours or labor hours.

Direct Labour-Hours

The total man-hours expended by workers directly involved in the manufacturing process.

Manufacturing Overhead

All indirect costs associated with manufacturing, such as indirect materials, indirect labor, and other factory-related expenses.