A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the:
A)direct labor hourly rate.
B)raw material per unit cost.
C)manufacturing overhead costs.
D)number of direct labor hours applied.

Question

Quizplus · Accepted Answer

Determining the reasonableness of manufacturing overhead costs is a major difficulty in inventory valuation as it includes various indirect costs that cannot be easily traced to individual units of product. The allocation and apportionment of these costs to inventory requires judgment and estimation, and any errors in this process can significantly impact the accuracy of inventory valuation. Direct labor, raw materials, and the number of direct labor hours can be directly measured and verified, making them less problematic to verify for inventory valuation purposes.

A Major Difficulty in the Verification of Inventory Cost Records