Wintergreen Products Allocates Overhead Based on Direct Labor Hours

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

Correct Answer:

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