Some accountants would argue that any variances from standard costs,when such standards are current,should be written off to cost of goods sold.The principal rationale for this treatment is:
A)This is the treatment required currently under generally accepted accounting principles.
B)To allocate such variances implies that asset values on the balance sheet (i.e. ,inventories)contain the cost of inefficiencies.
C)The negligible effect this treatment has on total cost of goods sold for the period.
D)Consistency with current income tax provisions.

Question

Quizplus · Accepted Answer

Writing off variances from standard costs to cost of goods sold implies that the inventories on the balance sheet do not include the cost of inefficiencies. Allocating such variances to inventories would distort the true value of the inventory and mislead the users of financial statements. Therefore, it is better to write off such variances to cost of goods sold. This treatment is consistent with the principle of conservatism in accounting.

Some Accountants Would Argue That Any Variances from Standard Costs,when