If manufacturing cost variances are considered to be material the preferred treatment is to pro rata the variance to work in process, finished goods inventory and cost of sales.

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When manufacturing cost variances are considered material, the preferred treatment is to allocate the variance among work in process, finished goods inventory, and cost of sales based on the stages of production the variance impacts. This approach ensures that the cost of inventory and cost of goods sold are accurately reflected.

If Manufacturing Cost Variances Are Considered to Be Material the Preferred