The Applicable Financial Reporting Framework Allows the Audit Client to Determine

question 81

Multiple Choice

The applicable financial reporting framework allows the audit client to determine both the cost and market value of inventory.Select the correct item(s) from the following list regarding these determinations:

• A)The client must use FIFO to determine the cost of inventory at year-end.With FIFO,the client determines the cost of good sold using the earliest inventory items purchased.
• B)The client must use FIFO to determine the cost of inventory at year-end.With FIFO,the client determines the cost of good sold using the latest inventory items purchased.
• C)The client can choose to use either FIFO or average cost to determine the cost of inventory at year-end (in the U.S.LIFO can also be used to determine the cost of inventory).
• D)The client determines the market value of inventory by estimating the amount the sales price of inventory at the end of the year.

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Definitions:

Standard Costs

Predetermined or estimated costs of manufacturing, selling, and administrative activities, used for budgeting and assessing performance.

Rate Variance

The difference between an expected or standard cost and the actual cost incurred, often used in budgeting and financial analysis to gauge performance.

Standard Wage Rate

The predetermined rate of pay for a specific job or task over a set time period.

Wage Rate

The amount of compensation paid to an employee per unit of time (e.g., hour, day, week) for their labor.