Which of the following statements is correct?
A) The overhead charged to inventory at the balance sheet date can be understated if the salaries of administrative personnel are inadvertently or intentionally charged to indirect manufacturing overhead.
B) When jobs are billed on a cost-plus basis, revenue and total expenses are both affected by charging labor to incorrect jobs.
C) Payroll is a significant portion of inventory for retail and service industry companies.
D) The valuation of inventory is affected if the direct labor cost of individual employees is improperly charged to the wrong job or process.

Question

Quizplus · Accepted Answer

The direct labor cost of individual employees has a direct impact on the valuation of inventory, and if it is improperly charged to the wrong job or process, it can result in an incorrect valuation of inventory. The other options are incorrect as the salaries of administrative personnel charged to indirect manufacturing overhead would not impact the inventory at balance sheet date, payroll is not a significant portion of inventory for retail and service industry companies, and charging labor to incorrect jobs would only impact the expenses, not revenue.

Which of the Following Statements Is Correct