When standard costs are used in a cost accounting system, the transfer of units from the Finished Goods Inventory to the Cost of Goods Sold account involves:
A) A debit to the Cost of Goods Sold account for the actual cost of units transferred.
B) A credit to the Finished Goods Inventory account for the standard cost of units transferred.
C) Recording a cost variance for the difference between the actual and standard cost of units transferred.
D) The elimination of any cost variances relating to units sold.

Question

Quizplus · Accepted Answer

In a standard cost system, the Finished Goods Inventory is credited at the standard cost when units are sold, reflecting the predetermined cost rather than the actual cost.

When Standard Costs Are Used in a Cost Accounting System