Answer:
b. decrease by $1,700,000
Explanation:
At the end of the year, overhead applied was $42,000,000.
Actual overhead was $40,300,000.
Closing over/underapplied overhead into Cost of Goods Sold would cause
net income b. decrease by $1,700,000
An increase in the inventory ($42,000,000-$40,300,000) $1,700,000 would cause the inventory to be overstated by the amount $1,700,000 hence decreasing the income statement by the same amount.
