If the Revenues Are Correctly Reported and the Gross Profit

question 70

Multiple Choice

If the revenues are correctly reported and the gross profit of a company is understated, what is the effect on stockholders' equity?

• A) understated
• B) overstated
• C) correctly stated
• D) none of these

---

Definitions:

Fixed Overhead Volume Variance

The difference between the budgeted and actual quantity of units produced, multiplied by the fixed overhead rate per unit.

Sales Orders

Formal documents issued by a buyer to a seller authorizing the sale of a specific quantity of goods at a specified price, which upon acceptance, becomes a contract.

Machine Breakdowns

Situations when industrial or office machinery stops functioning due to mechanical failure, necessitating repair or replacement.

Utility Costs

Expenses incurred for essential services such as electricity, gas, water, and sewer, which are necessary for operating a business or maintaining a home.