At the beginning of the year, Sam’s work in progress was $6\,500$ and at the end of the year it was $11\,200$. When Sam drew up his manufacturing account, he did not include the adjustment for work in progress. What effect would this omission have on the cost of production and the gross profit?
- Acost of production overstated; gross profit overstated
- Bcost of production overstated; gross profit understated
- Ccost of production understated; gross profit overstated
- Dcost of production understated; gross profit understated