While auditing the valuation of finished goods, the auditor examines the basis used by management for determining cost. The accountant provides…

While auditing the valuation of finished goods, the auditor examines the basis used by management for determining cost. The accountant provides costing sheets prepared for sample carpets, which were originally developed for obtaining customer orders. These costing details include higher design, development, and trial overheads, and the same basis has been used for valuing the finished goods inventory. The auditor evaluates whether such costing is appropriate for inventory valuation in accordance with applicable principles. Based on the above scenario, which of the following statements is most appropriate?