Identify the Primary Reason for Conducting a Product Audit

question 71

Multiple Choice

Identify the primary reason for conducting a product audit.

• A)To develop a marketing plan for new products
• B)To detect sick products and bury them
• C)To earn the estimated profits without introducing new products
• D)To implement cost-cutting strategies without altering the product mix

---

Definitions:

Bad Debt Expense

An expense reported on the income statement, reflecting the cost of accounts receivable that a company does not expect to collect due to customer defaults.

Allowance for Doubtful Accounts

A contra-asset account that represents an estimate of accounts receivable that may not be collected.

Percentage of Sales Basis

A method used to forecast future financial outcomes by assuming that certain expenses, net income, and balance sheet items change in direct proportion to changes in sales.

Uncollectibles

Debts from customers that are considered impossible to collect and are therefore written off as a loss.