Woodhead Inc. 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. Its standard cost per unit produced is $37.45. During the year, the company produced and sold 24,400 units at a price of $47.40 per unit and its selling and administrative expenses totaled $92,000. The company does not have any variable manufacturing overhead costs. 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) $913,780
B) $1,190,385
C) $947,605
D) $879,955

Question

Woodhead Inc. 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. Its standard cost per unit produced is $37.45. During the year, the company produced and sold 24,400 units at a price of $47.40 per unit and its selling and administrative expenses totaled $92,000. The company does not have any variable manufacturing overhead costs. 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) $913,780 
B) $1,190,385 
C) $947,605 
D) $879,955

Quizplus · Accepted Answer

11ea7761_16f8_f99c_81a5_195d9775eff0_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.
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