Howard Lumber Company mistakenly classified a product cost as an expense that totaled $20,000. The company produced 2,000 units of product and sold 1,000 of them during the year. Management is paid a bonus equal to 2% of net income. In the year in which the mistake was made:

product costs were overstated.

management bonuses were overstated.

the company's income statement portrayed a more favorable position than actually existed.

the company's net income was understated.