Wintergreen Products Allocates Overhead Based on Direct Labor Hours

question 8

Multiple Choice

Wintergreen Products allocates overhead based on direct labor hours. During 2011 overhead was overapplied by $4,000. Assuming that the year-end adjustment to clear out the overapplied overhead has not yet been done, which of the following statements is most likely trueif there are no ending inventories?

• A) Direct material costs are understated
• B) Direct labor costs are understated
• C) Cost of goods sold is overstated
• D) Net income is overstated

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Definitions:

Residence Seniority

The system or principle where entitlements, decision-making, or authority within a community or family is accorded based on the length of domicile or membership.

Pastoralism

A form of agriculture aimed at producing livestock, rather than growing crops, where keepers of herds, flocks, or herds move from location to location in search of pastures.

Migratory Herds

Groups of animals that move from one region or habitat to another according to the seasons, in search of food, better conditions, or breeding grounds.

Permanent Settlements

Communities where people live year-round, characterized by durable houses and infrastructure, contrasting with nomadic or seasonal dwellings.