If Raw Materials Are Carried in the Materials Inventory at Standard

question 55

Multiple Choice

If raw materials are carried in the Materials Inventory at standard cost, then it is reasonable to assume that the:

• A) price variance is recognized when materials are purchased.
• B) price variance is recognized when materials are placed into production.
• C) company does not follow generally accepted accounting principles.
• D) efficiency variance is recognized when the materials are purchased.

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Definitions:

Selling Activity

This refers to the process or actions involved in transferring ownership of goods or services from one party to another in exchange for money.

Cost Of Goods Sold

This refers to the direct costs attributable to the production of the goods sold by a company, including materials and labor.

Average Merchandise Inventory

The mean value of a company's inventory over a certain period, calculated to assess inventory levels and cost of goods sold.

Turnover Ratio Calculation

A measurement that calculates how frequently an asset or portfolio is replaced or traded during a specific period.