Final answer:
The correct answer is 'retention of excess materials by work centers,' as this is not typically an internal control procedure in the conversion cycle. Instead, excess materials should be returned to the storeroom to prevent misuse or theft, which maintains proper inventory control and security.
Step-by-step explanation:
The question asks which of the listed options is not an internal control procedure that should be in place in the conversion cycle. The conversion cycle refers to the process within a business that involves the transformation of raw materials into finished goods. Proper internal controls are vital to maintaining efficiency and security in this cycle. Let's review the options:
- Calculation and analysis of direct material and direct labor variances is indeed an internal control to measure and control costs.
- Retention of excess materials by work centers is not typically an internal control procedure. In contrast, excess materials should be returned to the storeroom to prevent misuse or theft.
- Physical count of inventory items is a control measure to verify actual inventory against recorded amounts.
- Limited access to raw material and finished goods inventories is a security measure to prevent unauthorized access or theft.
Therefore, the correct answer is b. retention of excess materials by work centers, as it is not an internal control procedure that should be typically in place and may actually undermine proper inventory management.