A Major Difficulty in the Verification of Inventory Cost Records

question 103

Multiple Choice

A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of:

• A) direct labor's hourly rate.
• B) raw materials per unit cost.
• C) cost allocations.
• D) number of direct labor hours applied.

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Definitions:

Reliability

The degree to which the result of a measurement, calculation, or specification can be depended on to be accurate.

Validity

The extent to which a test or instrument measures what it is supposed to measure.

Predictive Ability

The capacity to accurately forecast future events or outcomes based on current or past information.

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together.