Woodhead Inc. manufactures one product. It does not maintain any beginning or ending 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. Its standard cost per unit produced is $37.45. During the year, the company produced and sold 24,400 units at a price of $47.40 per unit and its selling and administrative expenses totaled $92,000. The company does not have any variable manufacturing overhead costs. 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) ($36,300)
B) $33,825
C) ($33,825)
D) $36,300

Question

Woodhead Inc. manufactures one product. It does not maintain any beginning or ending 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. Its standard cost per unit produced is $37.45. During the year, the company produced and sold 24,400 units at a price of $47.40 per unit and its selling and administrative expenses totaled $92,000. The company does not have any variable manufacturing overhead costs. 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) ($36,300) 
B) $33,825 
C) ($33,825) 
D) $36,300

Quizplus · Accepted Answer

11ea7761_16f8_d28b_81a5_1fd9f98383af_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.