Which Statement Is True Concerning Unfavorable Variances in a Standard

question 113

Multiple Choice

Which statement is true concerning unfavorable variances in a standard costing system?

• A) They are recorded only if they are significant.
• B) They are offset by favorable variances for the same amounts.
• C) They are recorded in the cost of goods sold account when incurred.
• D) They are recorded with debits.

---

Definitions:

Contribution Margin

The amount by which sales revenue exceeds variable costs, used to cover fixed costs and generate profit.

Sales Mix

The composition of different products or services sold by a business, affecting overall sales volume, revenue, and profit margins.

Special Order

An order for goods or services that is unusual or not standard, often requiring a unique setup or production process.

Fixed Overhead

Regular, ongoing costs associated with operating a business that are not directly tied to production levels, such as rent and salaries.