School Time Corp

question 175

Essay

School Time Corp. completed a physical inventory at the end of 2014. A review of the physical inventory procedures and records uncovered several errors that are described below. In the columns provided, indicate the effect, if any, on the four financial statement items listed. Use the following codes for your answers:
O Overstatement U Understatement NE No Effect

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Definitions:

Variable Inputs

Variable inputs in production are those inputs that change in quantity with the level of output, such as raw materials and labor.

Inputs

The resources such as labor, materials, and capital that are used in the production process to create goods and services.

AFC

Acronym that stands for Average Fixed Cost, the fixed costs of production divided by the quantity of output produced.

ATC

Average Total Cost, which is the total cost of production divided by the number of goods produced.