A Client Maintains Perpetual Inventory Records in Quantities and in Dollars.If

question 90

Multiple Choice

A client maintains perpetual inventory records in quantities and in dollars.If the assessed control risk is high,an auditor would probably

• A)Apply gross profit tests to ascertain the reasonableness of the physical counts.
• B)Increase the extent of tests of controls relevant to the inventory cycle.
• C)Request the client to schedule the physical inventory count at the end of the year.
• D)Insist that the client perform physical counts of inventory items several times during the year.

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Definitions:

Marginal Cost

The price of creating an additional unit of any given product or service.

Profit-Maximizing Monopoly

A monopoly that adjusts its output level to where marginal costs equal marginal revenues to achieve the highest possible profit.

Additional Unit

In economics, refers to the next item or unit of production, used in analyzing the costs and benefits of producing one more unit of a good or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity produced, representing the cost per unit of output.