An Understatement of Ending Inventory Causes the Cost of Sales

question 43

Short Answer

An understatement of ending inventory causes the cost of sales for the period to be overstated/understated)__________________.

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Definitions:

Price Standard

A predetermined cost that management believes should be paid for an item, often used in budgeting and variance analysis.

Pounds

A unit of mass in the imperial system, symbolized as lb.

Labor Quantity Variance

The difference between the actual hours worked and the standard hours planned, multiplied by the standard labor rate.

Worker Fatigue

Worker fatigue refers to the physical and mental exhaustion that can decrease employee performance, potentially leading to mistakes and accidents.