Assuming that the number of units produced exceeds the number of units sold, misclassifying period costs as product costs will overstate net income relative to what net income would be without this error.
Answer the following statement true (T) or false (F)
True
Misclassifying period costs as product costs means that these costs are first accumulated in the Inventory account and then expensed when the goods are sold. Production exceeded sales; as such, inventory increased during the period and some of the misclassified period costs have passed through the Inventory account into the Cost of Goods Sold account with the rest remaining in the Inventory account. As a result, net income would be overstated because the understated expense would exceed the overstatement of cost of goods sold.
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