In a journal entry for a standard costing system that records favourable variances, to increase the relevant variance account
A)causes a credit to Cost of Goods Sold.
B)decreases the Operating Income Account.
C)the variance account must be debited.
D)the variance account must be credited.
E)reduces the contra account.

Question

Quizplus · Accepted Answer

To record a favourable variance, the variance account must be credited. This increases the balance of the variance account, indicating that actual costs were less than expected which is desirable. Therefore, options A and B are incorrect. Option C is also incorrect as debiting the variance account would decrease the balance, indicating an unfavorable variance. Option E is irrelevant as there is no mention of a contra account in the scenario.

In a Journal Entry for a Standard Costing System That