Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income. 
Definitions:
External Financial Reports
Financial statements prepared for external users like shareholders, creditors, and regulatory agencies.
Direct Materials
The raw materials that are used directly in the production of a product.
Manufacturing Overhead
All indirect costs associated with manufacturing, including expenses related to indirect labor, indirect materials, maintenance, and utilities in the production facility.
Labor-Related
Pertaining to or concerning the workforce, including aspects such as hiring, management, and costs associated with employees.
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