If, at the End of a Period, Matthew Company Erroneously

question 4

Multiple Choice

If, at the end of a period, Matthew Company erroneously excluded some goods from its ending inventory and also erroneously did not record the purchase of these goods in its accounting records, these errors would cause

• A) no effect on the company's net income, working capital, and retained earnings.
• B) the company's cost of goods available for sale, cost of goods sold, and net income to be understated.
• C) the company's ending inventory, cost of goods available for sale, and retained earnings to be understated.
• D) the company's ending inventory, cost of goods sold, and retained earnings to be understated.

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Definitions:

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost, indicating how much the actual labor rate deviates from the expected standard.

Standard Costs

The predetermined costs associated with manufacturing a product or providing a service, used for budgetary and performance evaluation purposes.

Direct Labor Time Variance

A measure of the difference between the expected time to complete a task and the actual time taken.

Direct Labor Costs

The wages and related expenses for employees who are directly involved in the production of goods or services.