Divisional management stated that a recent gross margin increase was due to increased efficiency in manufacturing operations. Which of the following audit procedures would be most relevant to that assertion?
a) Select a sample of finished goods inventory and trace raw materials cost back to purchase prices to determine the accuracy of the recorded raw materials price.
b) Obtain a physical count of inventory.
c) Take a physical inventory of equipment to determine if there were significant changes.
d) Select a sample of products, then compare costs per unit this year to those of last year, test cost buildups, and analyze standard cost variances.
Answer: d) Select a sample of products, then compare costs per unit this year to those of last year, test cost buildups, and analyze standard cost variances.
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