Mary Todd Is Auditing White House Furniture

question 26

Multiple Choice

Mary Todd is auditing White House Furniture.In selecting a sample of purchases,she finds that a purchase order is missing.She should

• A) select another purchase to test.
• B) have the client recreate the purchase order.
• C) consider the sample item a deviation.
• D) ask the client if the purchase was authorized.

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Definitions:

Departmental Overhead Rates

The allocation of indirect costs to specific departments based on relevant cost drivers or bases.

Plantwide Rate

A single overhead absorption rate used throughout an entire factory or plant, applied uniformly to all cost objects irrespective of the department in which they were created.

Budgeted Activity Rate

The estimated overhead rate used for budgeting, calculated based on anticipated levels of activity.

Manufacturing Overhead Rate

The ratio used to allocate manufacturing overhead costs to products based on a cost driver, such as labor hours or machine hours.