Gersbach 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:
The net operating income for the year is closest to:
A) ($2,349)
B) $85,915
C) $70,200
D) $145,368

Question

Gersbach 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:
 The net operating income for the year is closest to:
A) ($2,349) 
B) $85,915 
C) $70,200 
D) $145,368

Quizplus · Accepted Answer

11ea7761_16d8_c802_81a5_dffd9f953587_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.
 11ea7761_16d8_ef13_81a5_5388c61524cf_TB2580_00

Gersbach Corporation Manufactures One Product