What is the most common treatment of the ﬁxed-overhead budget variance at the end of the accounting period?
A)Reported as a deferred charge or credit.
B)Allocated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold.
C)Charged or credited to Cost of Goods Sold.
D)Allocated among Cost of Goods Manufactured, Finished-Goods Inventory, and Cost of Goods Sold.
E)Charged or credited to Income Summary.

Question

Quizplus · Accepted Answer

The most common treatment for the fixed-overhead budget variance is to charge or credit it to the Cost of Goods Sold account. This is because the fixed overhead costs are included in the cost of goods sold, and any variance related to these costs should also be reflected in this account. Allocating the variance among other accounts may not accurately reflect the impact of the variance on the company's overall financial performance. Reporting it as a deferred charge or credit or allocating it among other inventory accounts may also result in misleading financial statements.

What Is the Most Common Treatment of the ﬁXed-Overhead Budget