A Test of Controls to Determine Proper Authorization for the Addition

question 11

Multiple Choice

A test of controls to determine proper authorization for the addition of a major piece of equipment would include all of the following except

• A)examination of purchase agreements.
• B)review of minutes of the board of directors' meetings.
• C)review of approvals by a capital budgeting committee.
• D)examination of the identification tags attached to equipment.

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Definitions:

Economies of Scope

Cost advantages that a business achieves by providing a variety of products rather than specializing in a single product or service.

Economies of Scope

Cost advantages that enterprises obtain through the diversification of production, by producing multiple products using the same operations or inputs.

Diversification Strategies

Business approaches to entering new markets or industries to reduce reliance on a single market or product line.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.