Jones,CPA,used a Classical Variables Sampling Application to Examine the Inventory

question 74

Multiple Choice

Jones,CPA,used a classical variables sampling application to examine the inventory balance of XYZ Company.The recorded balance of the inventory was $240,000,and Jones determined a tolerable misstatement of $12,000.Jones' sampling procedures resulted in a precision interval of $224,000 to $236,000.As a result,Jones should conclude that the

• A)Inventory balance is fairly stated.
• B)Inventory balance is materially misstated.
• C)Tolerable misstatement should be increased.
• D)Risk of incorrect acceptance is below the desired level.

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Definitions:

Standard Bikes

Refers to bicycles that adhere to specific industry norms and standards, typically meant for average or typical use scenarios.

Fixed Costs

Costs that do not vary with the level of output or sales over the short term, such as rent or salaries.

Variable Costs

Costs that vary in direct proportion to changes in production or sales volume, such as materials and labor.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, determined by the proportion of fixed costs to variable costs.