Lambda Company made an error in computing the percentage of completion of the current year’s beginning work-in-process inventory. The error resulted in the assignment of a higher percentage of completion to each unit of the inventory than actually was the case. There was no ending work-in-process inventory this year-end. The company uses the FIFO cost flow method.

Required:

State and explain the effect in the current year of the error on the computation of equivalent units produced (overstated or understated) and the computation of costs per equivalent unit (overstated or understated)?