If standard cost variances are allocated (i.e. ,prorated)to inventory and cost of goods sold (CGS)accounts at the end of a period,which of the following is correct?
A)Conceptually,the amount allocated to each account is based on the relative amount of the current period's standard cost in the end-of-period balance in each account.
B)The resulting balances represent relative actual cost in each of the affected accounts.
C)There is a presumption that the net variance for the period is immaterial in amount.
D)The amount allocated to inventories is generally larger than the amount allocated to CGS.

Question

Quizplus · Accepted Answer

The allocation of standard cost variances to inventory and cost of goods sold (CGS) accounts at the end of a period is based on the relative amount of the current period's standard cost in the end-of-period balance in each account. This means that the amounts allocated to each account will vary depending on the balances in each account. Therefore, choice A is correct. Choice B is incorrect because the resulting balances represent a combination of standard and actual costs, not just actual costs. Choice C is incorrect because there is no presumption of materiality for standard cost variances. Finally, choice D is incorrect because the amount allocated to inventories may be larger or smaller than the amount allocated to CGS, depending on the relative balances in each account.

If Standard Cost Variances Are Allocated (I