When standard costs are used in a cost accounting system:
A)A favorable cost variance results when standard amounts are less than actual costs.
B)Cost variances are shown in the year-end balance sheet as assets,if favorable,or as liabilities,if unfavorable.
C)Costs charged to the Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold accounts are actual costs.
D)Costs charged to the Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold accounts are at standard costs.

Question

Quizplus · Accepted Answer

When standard costs are used in a cost accounting system, costs charged to the Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts are at standard costs. This allows for easy comparison between actual costs and standard costs, and the calculation of cost variances. A favorable cost variance results when actual costs are less than standard costs. Cost variances are not shown as assets or liabilities on the balance sheet.

When Standard Costs Are Used in a Cost Accounting System