Howard Lumber Company Mistakenly Classified a Product Cost as an Expense

question 130

Multiple Choice

Howard Lumber Company mistakenly classified a product cost as an expense that totaled $20,000.The company produced 2,000 units of product and sold 1,000 of them during the year.Management is paid a bonus equal to 2% of net income.In the year in which the mistake was made:

• A) product costs were overstated.
• B) management bonuses were underpaid.
• C) the company's income statement portrayed a more favorable position than actually existed.
• D) the company's net income was overstated.

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Definitions:

Between-group Variance

Between-group variance measures the variability of group means around the overall mean, used in analyzing differences between groups.

F-ratios

Statistical values used in the analysis of variance (ANOVA) tests, indicating the ratio of variance between groups to the variance within groups.

Theoretical Distribution

A mathematical function that represents the probabilities of occurrence of different possible outcomes for an experiment.

F-ratio

A statistical measure used primarily in analysis of variance (ANOVA), calculated by dividing the variance between group means by the variance within the groups.