Ferrero 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: When the company closes its standard cost variances, the Cost of Goods Sold will increase (decrease)by:
A)$56,580
B)($125,916)
C)($56,580)
D)$125,916

Question

Ferrero 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:  When the company closes its standard cost variances, the Cost of Goods Sold will increase (decrease)by:
A)$56,580 
B)($125,916) 
C)($56,580) 
D)$125,916

Quizplus · Accepted Answer

11ea7998_5cf9_b50c_911b_3b523c92386c_TB2627_00_TB2627_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.

Ferrero Corporation Manufactures One Product