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:

-The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:
A) $1,128,750
B) $1,262,370
C) $1,195,560
D) $1,303,710

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:
 
-The adjusted Cost of Goods Sold after closing all of the variances to Cost of Goods Sold will be closest to:
A) $1,128,750 
B) $1,262,370 
C) $1,195,560 
D) $1,303,710

Quizplus · Accepted Answer

11ea7761_16f4_65a4_81a5_33f5fecc4ff6_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.
 11ea7761_16f4_8cb5_81a5_ad82c6e2fa63_TB2580_00

Catherman Corporation Manufactures One Product