Prior to 2017, Heberling Inc. excluded manufacturingoverhead costs from work in process and finished goodsinventory. These costs have been expensed as incurred. In2017, the company decided to change its accountingmethods for manufacturing inventories to full costing byincluding these costs as product costs. Assuming thatthese costs are material, how should this change bereflected in the financial statements for 2016 and 2017?

Question

Prior to 2017, Heberling Inc. excluded manufacturing
overhead costs from work in process and finished goods
inventory. These costs have been expensed as incurred. In
2017, the company decided to change its accounting
methods for manufacturing inventories to full costing by
including these costs as product costs. Assuming that
these costs are material, how should this change be
reflected in the financial statements for 2016 and 2017?

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