By How Much Will Net Income for 2020 Be Over

question 119

Multiple Choice

By how much will net income for 2020 be over or understated?

• A) $2,000 understated
• B) $4,000 overstated
• C) $6,000 understated
• D) $6,000 overstated
• E) There is no effect on net income.

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Definitions:

Direct Labor-Hours

The total hours worked directly on the manufacturing of goods.

Variable Overhead

Costs that fluctuate with changes in production volume, such as utilities and materials, affecting the cost to produce goods or services.

Direct Materials

The raw materials that are directly traceable to the production of a specific product and constitute a significant portion of the product's direct costs.

Direct Labor-Hours

The total hours worked by employees directly involved in manufacturing products or delivering services.