Which of the Following Statements Regarding Variances Is(are) False

question 9

Multiple Choice

Which of the following statements regarding variances is(are) false?
(A) In general and holding all other things constant, an unfavorable variance decreases operating profits.
(B) A favorable variance is not always good, and an unfavorable variance is not always bad.

• A) Only A is false.
• B) Only B is false.
• C) Both of these are false.
• D) Neither of these is false.

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Definitions:

Overstated Beginning Inventory

An accounting error where the starting inventory level is recorded higher than it actually is, leading to inaccuracies in financial statements.

Lower of Cost or Market

An accounting principle that values inventory at the lower amount between its original cost and its current market price.

Inventory Valuation

The method used to assess the cost of unsold goods or materials held by a company, impacting financial reporting and taxation.

Specific Identification Method

a method in inventory management and accounting that tracks the cost of specific items of inventory, often used for unique or high-value items.