Use the Following Information for Questions

question 87

Multiple Choice

Use the following information for questions.
Hudson, Inc.is a calendar-year corporation.Its financial statements for the years 2011 and 2010 contained errors as follows:
-Assume that the proper correcting entries were made at December 31, 2010.By how much will 2011 income before taxes be overstated or understated?

• A)$1,000 understated
• B)$1,000 overstated
• C)$2,000 overstated
• D)$5,000 overstated

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Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate product cost information.

Activity Rate

The cost driver rate in activity-based costing, used to allocate costs based on the activities that consume resources.

Supervising

The act of overseeing and managing employees or processes to ensure they are executed properly and efficiently.

Activity-Based Costing

A detailed approach to determining the cost of goods or services by allocating overhead costs based on the specific activities undertaken to produce that product or service.