Ferrero Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The company has provided the following information:
The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year:
When the company closes its standard cost variances,the Cost of Goods Sold will increase (decrease)by:
A) $56,580
B) ($125,916)
C) ($56,580)
D) $125,916

Question

Ferrero Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The company has provided the following information:
 The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year:
 When the company closes its standard cost variances,the Cost of Goods Sold will increase (decrease)by:
A) $56,580 
B) ($125,916) 
C) ($56,580) 
D) $125,916

Quizplus · Accepted Answer

11ea7761_16d3_bee0_81a5_01c421c21d87_TB2580_00 An unfavorable total variance has the effect of increasing Cost of Goods Sold and thereby decreasing Retained Earnings. A favorable variance has the opposite effects on Cost of Goods Sold and Retained Earnings.

Ferrero Corporation Manufactures One Product