Why should a production-volume variance (PVV) that is material be prorated among work-in-process, finished goods, cost and cost of goods sold rather than writing it all off to cost of goods sold? a.If a PVV is always written off to cost of goods sold, then the assets on the balance sheet would be the same as actual costs. b.If a PVV is always written off to cost of goods sold, then the liabilities on the balance sheet would be overstated. c.If a PVV is always written off to cost of goods sold, then the balances in the inventory accounts on the balance sheet would be most accurate. d.If a PVV is always written off to cost of goods sold, a company could set its standard costs to either increase or decrease operating incomes.

Approximating the allocation of fixed costs based on actual output and actual costs so it is not…

Answered: Why should a production-volume variance…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter9: Standard Costing: A Functional-based Control Approach

Section: Chapter Questions

Problem 24E: Which of the following is true concerning labor variances that are not material in amount? a. They...

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Why should a production-volume variance (PVV) that is material be prorated among work-in-process, finished goods, cost and cost of goods sold rather than writing it all off to cost of goods sold?

	a.	If a PVV is always written off to cost of goods sold, then the assets on the balance sheet would be the same as actual costs.
	b.	If a PVV is always written off to cost of goods sold, then the liabilities on the balance sheet would be overstated.
	c.	If a PVV is always written off to cost of goods sold, then the balances in the inventory accounts on the balance sheet would be most accurate.
	d.	If a PVV is always written off to cost of goods sold, a company could set its standard costs to either increase or decrease operating incomes.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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