What Is the Effect of an Error in the Ending

question 154

Essay

What is the effect of an error in the ending inventory balance on the accounts reported in the income statement?

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Definitions:

Actual Output

The actual quantity of goods or services produced by a company within a specified timeframe.

Variable Overhead Rate

The ratio of variable overhead costs to an activity base such as units produced or direct labor-hours, used for costing purposes.

Fixed Manufacturing Overhead

Costs related to manufacturing that do not change with the level of production, such as factory rent and salaries of supervisory personnel.

Budget Variances

The differences between budgeted amounts and actual amounts.