Catherman Corporation manufactures one product. It does not maintain any beginning or ending inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.
During the year, the company produced and sold 32,400 units at a price of $42.30 per unit. Its standard cost per unit produced is $36.90 and its selling and administrative expenses totaled $102,000. The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year:

-When the company closes its standard cost variances,the Cost of Goods Sold will increase (decrease)by:
A) $34,300
B) ($34,300)
C) $66,810
D) ($66,810)

Question

Catherman Corporation manufactures one product. It does not maintain any beginning or ending inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.
During the year, the company produced and sold 32,400 units at a price of $42.30 per unit. Its standard cost per unit produced is $36.90 and its selling and administrative expenses totaled $102,000. The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year:
 
-When the company closes its standard cost variances,the Cost of Goods Sold will increase (decrease)by:
A) $34,300 
B) ($34,300) 
C) $66,810 
D) ($66,810)

Quizplus · Accepted Answer

11ea7761_16f4_3e93_81a5_8b9bb6078ec9_TB2580_00 An unfavorable total variance has the effect of increasing Cost of Goods Sold and thereby decreasing Retained Earnings. A favorable variance has the opposite effects on Cost of Goods Sold and Retained Earnings.

Catherman Corporation Manufactures One Product