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If ending inventory of finished goods is understated, net income will be: A) Overstated B) Understated C) No change D) None of the above

If ending inventory of finished goods is understated, net income will be: A) Overstated B) Understated C) No change D) None of the above

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 25E: Last year, Orsen Company produced 25,000 juicers and sold 26,500 juicers for 60 each. The actual...
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If ending inventory of finished goods is understated, net income will be: A) Overstated B) Understated C) No change D) None of the above Balvan Company is a manufacturing firm that uses job-order costing. The company's inventory balances at the beginning and end of the year were as follows: Balance Beginning Balance Ending Balance Raw materials $14,000 $22,000 Work in process 27,000 9,000 Finished goods 62,000 77,000 The company applies overhead to jobs using a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated that it would work 33,000 machine hours and incur $231,000 in manufacturing overhead cost. The following transactions were recorded for the year: a.) Raw materials purchased: $315,000. b.) Raw materials requisitioned for use in production: $307,000 ($281,000 direct and $26,000 indirect). c) The following employee costs were incurred: Direct labour: $377,000
Transcribed Image Text:If ending inventory of finished goods is understated, net income will be: A) Overstated B) Understated C) No change D) None of the above Balvan Company is a manufacturing firm that uses job-order costing. The company's inventory balances at the beginning and end of the year were as follows: Balance Beginning Balance Ending Balance Raw materials $14,000 $22,000 Work in process 27,000 9,000 Finished goods 62,000 77,000 The company applies overhead to jobs using a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated that it would work 33,000 machine hours and incur $231,000 in manufacturing overhead cost. The following transactions were recorded for the year: a.) Raw materials purchased: $315,000. b.) Raw materials requisitioned for use in production: $307,000 ($281,000 direct and $26,000 indirect). c) The following employee costs were incurred: Direct labour: $377,000
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