When Inventory Valuation Is Based on an Appropriately Established and Effective

question 40

Multiple Choice

When inventory valuation is based on an appropriately established and effective standard cost system:

• A)cumulative variances are recognized.
• B)a significant unfavorable net variance may be reported as an expense of the current period.
• C)an insignificant favorable net variance may be reported as an expense of the current period.
• D)the explanatory notes to the financial statements will explain the disposition of the net variance.

---

Definitions:

Biological Magnification

The increasing concentration of a substance, such as a toxic chemical, in the tissues of organisms at successively higher levels in a food chain.

Food Chain

A series of organisms each dependent on the next as a source of food, representing the flow of energy and nutrients in an ecosystem.

Chemical Pollutant

Substances introduced into the environment that pose risks or harm to ecosystems, animals, or human health, often resulting from industrial, agricultural, or urban activities.