If There Have Been No Changes to a Control That

question 2

Multiple Choice

If there have been no changes to a control that a previous audit has found to be working effectively,________.

• A)an auditor must still test the controls and not place reliance on the prior year's testing
• B)an auditor must still test the controls but not to the same extent as the prior year's testing
• C)an auditor can rely on the prior year's work and not test controls in the current year
• D)an auditor can rely on the prior year's work but should test the controls every three years

Understand the concept of the break-even point and how it is depicted on a CVP graph.

Recognize the impact of changes in sales, variable expenses, and fixed expenses on a company’s financial performance.

Calculate and interpret the degree of operating leverage at different levels of sales.

Understand the margin of safety and its significance for a company's financial health.

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Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in manufacturing products or delivering services.

Variable Overhead

Costs of production that fluctuate with the level of output, such as utility expenses for machinery, which increase with more extensive production.

Direct Materials

Direct materials are raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the product's cost.

Direct Labor-Hours

The full sum of time spent by employees directly engaged in the process of creating products.