Hall's Office Supplies Is a Small Store in a Rural

question 39

Multiple Choice

Hall's Office Supplies is a small store in a rural area of the United States; Ian Hall is the owner. The store also employs three purchasing agents and an accountant. While the purchasing agents handle day-to-day inventory purchases, Ian makes all large purchases (equipment, furniture and computers, for example) himself. Each purchasing agent is responsible for purchasing a specific group of inventory items; for example, one purchasing agent handles all purchases of computer-related supplies (mouse pads, compact discs) . Each purchasing agent uses his/her best judgment when deciding how much and how often to order inventory items. When inventory and other items arrive at the store, the relevant purchasing agent checks it in and puts it in the stockroom. Vendors send invoices directly to the accountant, who pays them within thirty days and reconciles the bank statement at least monthly. Ian works as a salesperson Monday through Friday from 8 a.m. to 5 p.m.;
he is assisted by two half-time sales staff. One staff person works from 8 a.m. to 12 noon, while the other works from 1 p.m. to 5 p.m. The part-time staff is in charge of keeping the shelves stocked. Hall's Office Supplies maintains a manual accounting information system, and retains copies of all documents for one year.
-Ian could achieve stronger internal control by enforcing separation of duties for:

• A) Himself.
• B) The purchasing agents.
• C) The stockroom.
• D) Vendors.

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Definitions:

Underapplied Manufacturing Overhead

The amount by which the actual manufacturing overhead costs exceed the applied manufacturing overhead costs for a period.

Cost of Goods Sold

Direct expenditures involved in producing the merchandise a company sells, covering materials and labor.

Underapplied Manufacturing Overhead

Happens when the budgeted costs for manufacturing overhead are lower than the overhead expenses actually experienced.

Overapplied Manufacturing Overhead

A scenario in which the overhead costs assigned to manufacturing surpass the real overhead expenses that were incurred.