When standard costs are used in a cost accounting system, the transfer of units from the Finished Goods Inventory to the Cost of Goods Sold account involves:
A) A debit to the Cost of Goods Sold account for the actual cost of units transferred.
B) A credit to the Finished Goods Inventory account for the standard cost of units transferred.
C) Recording a cost variance for the difference between the actual and standard cost of units transferred.
D) The elimination of any cost variances relating to units sold.

Question

When standard costs are used in a cost accounting system, the transfer of 	units from the Finished Goods Inventory to the Cost of Goods Sold account involves:
A) A debit to the Cost of Goods Sold account for the actual cost of units transferred.
B) A credit to the Finished Goods Inventory account for the standard cost of units transferred.
C) Recording a cost variance for the difference between the actual and standard cost of units transferred.
D) The elimination of any cost variances relating to units sold.

Quizplus · Accepted Answer

In a standard cost system, the transfer of units from Finished Goods Inventory to Cost of Goods Sold is recorded at the standard cost, not the actual cost. Therefore, the Finished Goods Inventory account is credited for the standard cost of the units transferred.

When Standard Costs Are Used in a Cost Accounting System