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 costs.
B) raw material costs.
C) manufacturing overhead costs.
D) period costs.

Question

Quizplus · Accepted Answer

Manufacturing overhead costs can be difficult to verify and allocate to specific inventory items. They include indirect costs such as rent, utilities, and other indirect expenses that are not easily traced to a specific unit of inventory. Therefore, determining the reasonableness of manufacturing overhead costs is a major difficulty in the verification of inventory cost records. Direct labor and raw material costs are typically more straightforward and easier to verify. Period costs are not included in inventory valuation, so they are not relevant to this question.

A Major Difficulty in the Verification of Inventory Cost Records