ACCOUNTIN 4317-In order to audit inventory, we need to know
ACCOUNTIN 4317-In order to audit inventory, we need to know
Subject: Business   / Accounting
Question
1) In order to audit inventory, we need to know what GAAP requires in accounting for inventory. If the audit client measures the cost of inventory using the FIFO method, then which method does GAAP require the audit client to use in reporting the value of its ending inventory?
FIFO
Average cost
Lower of cost or market
LIFO
Lower of cost or net realizable value.
2) You are auditing a client who makes widgets. You identify the following budgetary information:
Total sales and production for the year 5,000 units
Sales price per widget $20.00
Cost of direct materials per widget $ 4.00
Cost of direct labor per widget $ 6.00
Cost of lease space for manufacturing $12,000 per month
What is the variable cost per unit?
$6
$10
$12,000 / 5,000 = $2.40
$8,000 / 5,000 = $1.60
$20,000 / 5,000 units = $4
$4
3) With regard to the audit of inventories, GAAS and GAAP require which, if any, of the following?
GAAS and GAAP require use of absorption cost accounting for merchansing inventories.
GAAS and GAAP require use of absorption cost accounting for manufacturing inventories.
None of the other choices are correct.
GAAS and GAAP require use of variable cost accounting for manufacturing inventories.
GAAS and GAAP do not require use of absorption cost accounting for manufacturing inventories because audit procedures for a cost accounting system must be designed to fit the specific circumstances encountered in each case.
4) You are auditing a client who makes widgets. You identify the following budgetary information:
Total sales and production for the year 5,000 units
Sales price per widget $20.00
Cost of direct materials per widget $ 4.00
Cost of direct labor per widget $ 6.00
Cost of lease space for manufacturing $12,000 per month
If the audit client makes 4,000 widgets, what is the total amount of variable costs associated with this level of production?
None of the other choices are correct.
$16,000
$20,000
$40,000
$24,000
5) You are auditing a client who makes widgets. You identify the following budgetary information:
Total sales and production for the year 5,000 units
Sales price per widget $20.00
Cost of direct materials per widget $ 4.00
Cost of direct labor per widget $ 6.00
Cost of lease space for manufacturing $12,000 per month
What is the break-even point expressed in units?
None of the other choices are correct.
15,000
12,200
14,400
600
