If a Company Mistakenly Counts Less Items During a Physical

question 142

Multiple Choice

If a company mistakenly counts less items during a physical inventory than actually exist, how will the error affect the cost of goods sold?

• A) understated
• B) overstated
• C) no change
• D) only inventory will be affected

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, resulting in market stability.

Shortage

A shortage occurs when the demand for a product exceeds its supply at a particular price, leading to a scarcity of the product.

Price Floor

A government-imposed limit below which prices cannot fall, often used in agricultural markets.

Equilibrium Price

The price at which the quantity of goods demanded equals the quantity of goods supplied, leading to market stability.