Sharp Company's Records Show That Overhead Was Overapplied by $10,000

question 91

Multiple Choice

Sharp Company's records show that overhead was overapplied by $10,000 last year. This overapplied overhead was closed out to the Cost of Goods Sold account at the end of the year. In trying to determine why overhead was overapplied by such a large amount, the company has discovered that $6,000 of depreciation on factory equipment was charged to administrative expense in error. Given the above information, which of the following statements is true?

• A)Manufacturing overhead was actually overapplied by $16,000 for the year.
• B)The company's net income is understated by $6,000 for the year.
• C)Under the circumstances posed above, the error in recording depreciation would have no effect on net operating income for the year.
• D)The $6,000 in depreciation should have been charged to jobs rather than to administrative expense.

Analyze the economic factors contributing to the prosperity of certain groups in North America.

Evaluate the consequences of the French and Indian War on British colonial policy.

Assess the British motivations behind imposing restrictions on the American colonies.

Examine changes in American cities during the 18th century due to trade.

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Definitions:

Basis Points

A financial measurement unit representing the percentage shift in the value or rate of a financial asset, which is equal to one hundredth of a percent.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, expressed as an annual rate.

Duration

A measure of the sensitivity of a bond's or fixed income portfolio's price to changes in interest rates, often used to manage interest rate risk.

Modified Duration

A measure of the sensitivity of a bond's price to changes in interest rates, specifically reflecting how much the duration changes for a 1% change in yield.