A Physical Count of Inventory Is Required Even Though the Company

question 105

Multiple Choice

A physical count of inventory is required even though the company uses the perpetual inventory system.What internal activity control is this an example of?

• A) segregation of duties
• B) safeguarding of assets and records
• C) checks on recorded amounts
• D) clearly defined authority and responsibility

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Definitions:

Substitute Resource

Alternative resources or inputs that can be used in place of another in the production process to produce a similar type of output.

Productivity

The efficiency with which input resources are converted into outputs, often measured as the ratio of output to input in a given time period.

Law of Diminishing Returns

The principle that as investment in a single factor of production increases, holding all others constant, the incremental gains in output will eventually decrease.

Law of Diminishing Marginal Utility

states that as a person consumes more of a good or service, the utility (satisfaction) gained from each additional unit decreases.