The Threat of Paying Prices That Are Too High for Goods

question 80

Multiple Choice

The threat of paying prices that are too high for goods ordered can pose a problem in the expenditure cycle.What is an appropriate control that would be applicable to help mitigate this threat?

• A)require the receiving department to verify the existence of a valid purchase order
• B)use only approved suppliers and solicit competitive bids
• C)only pay invoices that are supported by the original voucher package
• D)use bar-code technology

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Definitions:

Activity-Based Costing System

An accounting method that assigns costs to products based on the activities they require for production.

Batch-Level Costs

Costs that are incurred for every batch produced, regardless of the size of the batch, such as setup costs or inspection costs.

Product-Level Costs

Expenses directly tied to specific products, including costs for materials and labor required to produce these products, as well as costs associated with specific product designs or customized orders.

Traditional Costing System

An accounting method that allocates overhead costs to products based on a predetermined overhead rate.