If Ending Inventory Is Understated by $7,000 in 20X3,and Assuming

question 101

Multiple Choice

If ending inventory is understated by $7,000 in 20X3,and assuming a constant 30% tax rate,then what will be the effect on gross profit in 20X3?

• A)20X3 gross profit will be understated by $2,100.
• B)20X3 gross profit will be understated by $4,900.
• C)20X3 gross profit will be overstated by $4,900.
• D)20X3 gross profit will be understated by $7,000.
• E)20X3 gross profit will be overstated by $7,000.

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Definitions:

Labor

The human effort, either physical or mental, used in the production of goods and services.

Curves

In economics, curves are graphical representations that show the relationship between two variables, demonstrating how one variable changes in response to the other.

ATC

Average Total Cost; the sum of all production costs divided by the quantity of output produced, representing the cost per unit.

MC

An abbreviation often used for Marginal Cost, which represents the cost of producing one more unit of a good.