A Company Discovers That Its Cost of Goods Sold Is

question 65

True/False

A company discovers that its cost of goods sold is understated by an insignificant amount. They do not need to correct the error because of the conservatism principle.

---

Definitions:

Machine Hours

A measure of the amount of time a machine is operated, used as a basis for allocating manufacturing overhead costs to products.

Direct Labor Hours

The total hours of work directly involved in the production of goods, often used in costing and operational efficiency analysis.

Materials Handling

The movement, protection, storage, and control of materials and products throughout manufacturing, warehousing, distribution, consumption, and disposal.

Activity Rate

A measure used in activity-based costing to assign overhead costs to products or services, based on specific activities.