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avanturin [10]
3 years ago
8

Ferguson Company recognized $400 of estimated manufacturing overhead costs at the end of the month. How does this transaction af

fect the financial statements?
Business
1 answer:
nadezda [96]3 years ago
8 0

Answer:

This leads to a reduction in net income

Explanation:

Manufacturing overheads refer to those costs which indirectly relate to a good's production. Examples of manufacturing overheads would include depreciation charged on equipments used for production, rent of the factory wherein production takes place.

The effect of recognition of $400 of estimated manufacturing overheads would be reduction in net income since their recognition raises the cost of production which reduces gross profit. Consequently this would reduce the net income.

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