If cost variances are material, they should always be closed directly to Cost of Goods Sold.

Question

Quizplus · Accepted Answer

While cost variances can sometimes be closed directly to Cost of Goods Sold, it ultimately depends on the nature of the variance and the specific accounting policies of the company. Some variances may be closed to a different account, such as a production account or variance account, before ultimately being transferred to Cost of Goods Sold. Additionally, materiality is just one factor to consider when determining how to close cost variances.

If Cost Variances Are Material, They Should Always Be Closed