When recording variances in a standard cost system:
A) Both unfavorable material and labor variances are credited.
B) All unfavorable variances are credited.
C) All unfavorable variances are debited.
D) Only unfavorable material variances are debited.
E) Only unfavorable material variances are credited.

Question

Quizplus · Accepted Answer

In a standard cost system, variances are recorded to compare actual costs to standard costs. If the actual cost exceeds the standard cost, it results in an unfavorable variance, which means extra cost is incurred. To record this unfavorable variance, the account is debited. Hence, all unfavorable variances are debited.

When Recording Variances in a Standard Cost System