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Which of the following is true concerning labor variances that are not material in amount? a. They are closed to Cost of Goods Sold. b. They are prorated among Work in Process, Finished Goods, and Cost of Goods Sold. c. They are prorated among Materials, Work in Process, Finished Goods, and Cost of Goods Sold. d. They are reported as part of Overall Variance on the balance sheet at the end of the year.

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 9, Problem 24E
Textbook Problem
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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 as part of Overall Variance on the balance sheet at the end of the year.

To determine

Indicate the true statement regarding labor variances that are not material in amount.

Explanation of Solution

Justification for correct answer:

Direct material variances: The difference between the actual material cost per unit and the standard material cost per unit for the direct material purchased is known as direct material cost variance. The direct material variance can be classified as follows:

  • Direct materials price variance.
  • Direct materials quantity variance.

The direct-material purchase price variance is calculated based on the quantity purchased (PQ). The deviations between the standard price and actual price are highlighted by the purchase price variance and this variance is associated to the purchasing function of the firm...

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Chapter 9 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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