Supply Max Supplies $3.5 million cost of inventory at the end of last year was understated by

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Question:

Supply Max Supplies $3.5 million cost of inventory at the end of last year was understated by $1.3 million.

1. Was last? year's reported gross profit of $2.5 million? overstated, understated, or? correct? What was the correct amount of gross profit last? year?

Last years reported gross profit of $2.5 million was ________(overstated/understated). The correct amount of gross profit for last year is $______ million.