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

Question

Quizplus · Accepted Answer

Cost allocations can be a challenge to verify because they involve dividing shared costs among different products or departments, and the method used for allocation can affect the accuracy of the inventory valuation. Ensuring that the allocation is reasonable and consistent with the company's accounting policies is important in determining the accuracy of inventory cost records. The other options, such as hourly labor rates or raw materials per unit cost, may also impact inventory valuation, but they are usually easier to verify or are a more straightforward calculation.

A Major Difficulty in the Verification of Inventory Cost Records