Evaluate Each Inventory Error and Determine Whether It Overstates or Understates

question 46

Essay

Evaluate each inventory error and determine whether it overstates or understates each item.
$$\begin{array} { | l | l | l | } \hline \text { Inventory Errur } & \text { Cost af Goods Suld } & \text { Net Incume } \\\hline \text { Understate beginning inventory } & & \\\hline \text { Understate ending inventory } & & \\\hline \text { Overstate beginning inventory } & & \\\hline \text { Overstate ending inventory } & & \\\hline\end{array}$$

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Definitions:

Direct Materials Costs

The cost of raw materials that are directly used in the manufacture of a product.

FIFO Method

First-In, First-Out, an inventory valuation method where the first items purchased are the first ones to be removed from inventory.

Units Started and Completed

This term refers to items or products that begin and finish production within a specific accounting period, in the context of manufacturing or process accounting.

Applied Overhead

is an estimate of indirect costs assigned to individual units of production based on a predetermined rate.