Income statements prepared internally for management often show cost of goods sold at standard cost and variances are
A) separately disclosed.
B) deducted as other expenses and revenues.
C) added to cost of goods sold.
D) closed directly to retained earnings.

Question

Quizplus · Accepted Answer

Cost of goods sold at standard cost is used for internal management purposes to measure efficiency and identify areas of improvement. Variances from the standard cost are analyzed and separately disclosed to identify the reasons for the variances and take corrective action. This information is critical for management decision making and hence is separately disclosed in the income statement.

Income Statements Prepared Internally for Management Often Show Cost of Goods