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

question 22

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 operating income for the year.
• D)The $6,000 in depreciation should have been charged to Work-in-Process rather than to administrative expense.

---

Definitions:

Corporate Citizenship Theories

A collection of ideas and practices that consider the role of businesses in society, focusing on their responsibilities towards stakeholders and the environment.

Ethical Theories

Philosophical frameworks designed to guide decision-making by proposing various principles and values for distinguishing right from wrong.

Utilitarian Theory

A moral philosophy that emphasizes the greatest happiness for the greatest number, often used in decision-making processes.

Societal Utility

The degree to which something meets the needs and contributes to the well-being or benefit of society.