Choice "C" is correct. Testing the computation of standard overhead rates relates to the accumulation of costs during the manufacturing process, and not to whether the inventory is slow-moving, defective, or obsolete after manufacture.
Choice "b" is incorrect. During a tour of the manufacturing plant or production facility, the auditor should be alert for items that appear to be old, obsolete, or defective.
Choice "d" is incorrect. Comparisons of inventory balances with anticipated sales volume might indicate higher inventory levels than would be expected, perhaps due to slow-moving, defective, or obsolete inventory items.
Choice "a" is incorrect. Review of inventory experience and trends may indicate slow-moving, defective, or obsolete inventory items. For example, the auditor may notice a particular item that is building up in inventory, or a trend toward reduced sales of that item.