When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period,the cost variances should be:
A)Carried forward to the next accounting period.
B)Allocated between cost of goods sold,finished goods,and work in process.
C)Closed to cost of goods sold.
D)Written off as a selling expense.
E)Ignored.

Question

Quizplus · Accepted Answer

When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period, the cost variances should be closed to cost of goods sold in order to accurately reflect the actual cost of goods sold during the period. Allocation between finished goods and work in process would not be appropriate if the variances are deemed to be immaterial. Carrying forward the variances to the next accounting period would result in inaccurate costing for the next period. Writing off the variances as a selling expense would also be inappropriate. Ignoring the variances would result in inaccurate reporting of the company's financials.

When Standard Manufacturing Costs Are Recorded in the Accounts and the Cost