If the ending inventory of a firm is overstated by $50,000, by how much and in what direction (overstated or understated) will the firm's operating income be misstated? (Hint: Use the cost of goods sold model, enter hypothetically "correct" data, and then reflect the effects of the ending inventory error and determine the effect on cost of goods sold.)

50,000 overstated.

Explanation:

As the ending inventory is overstated by 50,000 we can conclude the implications using the inventory identity:

Beginning + Purchase = COGS + Ending

As the left side will be the correct display they will have no error.

Therefore the COGS will compensate the mistake in the ending ivnentory

0 = COGS + 50,000

COGS = -50,000

The COGS are 50,000 lower than it should be  therefore the gross profit is overstated as

Sales - COGS = Gross Profit

0 - (-50,000) = Gross Profit

+ 50,000 = Gross Profit

This also makes the operating income which, derives from gross profit to be overstated as well.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

um sure