The ending inventory for raw materials was overstated. This error will cause:

Question

Quizplus · Accepted Answer

When the ending inventory for raw materials is overstated, it means that the cost of materials that are assumed to have been used in production is understated. This is because the cost of raw materials used is calculated as beginning inventory plus purchases minus ending inventory. If the ending inventory is overstated, the subtraction is larger than it should be, leading to an understated cost of raw materials used. This does not directly affect the cost of goods sold or net income in the manner described by the other options.

The Ending Inventory for Raw Materials Was Overstated