A large favorable variance from standard costs at the end of the year should be:
A)Carried forward to the next fiscal year.
B)Shown as other income in the income statement.
C)Added to cost of goods sold in the income statement.
D)Allocated between ending inventories and cost of goods sold.

Question

Quizplus · Accepted Answer

A large favorable variance indicates that the actual costs were lower than the standard or expected costs. According to accounting principles, such variances should be allocated between the ending inventories and the cost of goods sold to accurately reflect the cost of production and inventory valuation. This allocation ensures that the financial statements present a true and fair view of the company's financial position and performance.

A Large Favorable Variance from Standard Costs at the End