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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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(Appendix 10A) Which of the following is true concerning labor variances that are not material in amount?

  1. a. They are closed to Cost of Goods Sold.
  2. b. They are prorated among Work in Process, Finished Goods, and Cost of Goods Sold.
  3. c. They are prorated among Materials, Work in Process, Finished Goods, and Cost of Goods Sold.
  4. d. They are reported on the balance sheet at the end of the year.
  5. e. All of these.

To determine

Identify the correct statement with respect to labor variances.

Explanation

Variance:

The amount obtained when actual cost is deducted from budgeted cost is known as variance. Variance is calculated to find whether the cost is over applied or under applied.

a.

The variances are closed to cost of goods sold if they are immaterial. It is an acceptable practice but only in case of immaterial labor variances. Therefore, option a is the correct answer.

b.

Material labor variances are prorated among work in process, finished goods and cost of goods sold...

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