An Operational Audit Report Which Deals with the Scrap Disposal

question 39

Multiple Choice

An operational audit report which deals with the scrap disposal function in a manufacturing company is most likely to address:

• A) The efficiency and effectiveness of the scrap disposal function and include any findings requiring corrective action.
• B) Whether the scrap material inventory is reported as a current asset.
• C) Whether the physical inventory count of the scrap material agrees with the recorded amount.
• D) Whether the scrap materials inventory is valued at the lower of cost or market.

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Definitions:

Producing Units

Producing units are individual entities, such as factories or plants, within an organization that are responsible for producing goods or services.

Marginal Cost

The extra expense associated with manufacturing an additional unit of a product or service.

Marginal Revenue (MR)

The incremental earnings obtained from the sale of an additional good or service unit.

Marginal Cost (MC)

The increase or decrease in the total cost that arises when the quantity produced changes by one unit.