An Overstatement of Ending Inventory in One Period Results in

question 81

Multiple Choice

An overstatement of ending inventory in one period results in

• A)no effect on net income of the next period.
• B)an overstatement of net income of the next period.
• C)an understatement of net income of the next period.
• D)an overstatement of the ending inventory of the next period.

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Definitions:

Excess Capacity

A situation where a company can produce more goods or services than currently demanded by the market, indicating underutilization of resources.

Allocated Fixed Costs

Fixed costs that are assigned or distributed across different departments, products, or activities within a company for budgeting and accounting purposes.

Direct Fixed Manufacturing Costs

Fixed costs directly associated with the manufacturing process, such as salaries of production supervisors.

Discontinue

The process of ending the production and sale of a product or service, often due to strategic reevaluation or lack of success.