Suppose That Hastings Corporation Overstates Its Ending Inventory for 2012

question 182

Multiple Choice

Suppose that Hastings Corporation overstates its ending inventory for 2012. What effect will this have on the reported amount of cost of goods sold for 2012?

• A) Overstate cost of goods sold.
• B) Understate cost of goods sold.
• C) Have no effect on cost of goods sold.
• D) Cannot be determined given the information provided.

---

Definitions:

Total Product

The overall quantity of goods or services produced by a firm or an economy over a specific period, often used to measure productivity.

Law of Diminishing Returns

An economic principle stating that if one factor of production is increased while other factors are held constant, the incremental output per unit of the increased factor will eventually decrease.

Decreasing Rate

A condition in which the rate or speed of a given process or phenomenon reduces over time.

Increasing Rate

A rate that accelerates or grows over time, often used in the context of compound interest, inflation, or the escalation of prices.