When Testing a Standard Cost System,the Auditor Does Not Normally

question 41

Multiple Choice

When testing a standard cost system,the auditor does not normally make which of the following inquiries?

• A)The method for developing standard costs.
• B)The method for identifying components of overhead and of allocating overhead to products.
• C)The method for identifying sales cutoff.
• D)The method used for allocating variances to inventory and cost of goods sold.

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Definitions:

FMV

Fair Market Value, the price at which property would sell between a willing buyer and seller in an arm's length transaction.

Gift Tax

A federal tax on the transfer of property by gift from one individual to another with the donor being primarily responsible for paying the tax.

FMV

Fair Market Value, an estimation of the market value of a property or asset, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.

Adjusted Basis

The original cost of an asset adjusted for factors such as depreciation or improvements, used to calculate capital gains or losses for tax purposes.