The most common treatment of an end-of-year immaterial overhead variance is to _____.
A)ignore it
B)allocate the variance among inventories and cost of goods sold
C)capitalize the variance as a cost of finished goods inventory
D)close the variance to cost of goods sold in the current period

Question

Quizplus · Accepted Answer

The most common treatment of an end-of-year immaterial overhead variance is to close the variance to cost of goods sold in the current period. This means that the variance is recognized as an expense in the current period and does not impact inventory values. A and C are not appropriate choices as ignoring the variance does not reflect accurate financial reporting, and capitalizing the variance as a cost of finished goods inventory would overstate the inventory value. B is also not an appropriate choice as allocating the variance among inventories and cost of goods sold would impact inventory values, which is not necessary for an immaterial variance.

The Most Common Treatment of an End-Of-Year Immaterial Overhead Variance