Eli Uses a Standard Costing System $\quad\quad\quad \$ 260$

question 59

Multiple Choice

Eli uses a standard costing system. At the end of the fiscal year, only the following variance accounts had balances: Material Price Variance $\quad\quad\quad \$ 260$ (debit)
Material Quantity Variance $\quad\quad \$ 35$ (credit)
Labor Efficiency Variance $\quad\quad \$ 65$ (credit) Assuming these amounts are not considered significant, which one of the following will be part of the journal entry to close these accounts?

• A) Credit to Cost of Goods Sold for $160
• B) Debit to Manufacturing Overhead Variances for $260
• C) Debit to Cost of Goods Sold for $160
• D) Credit to Manufacturing Overhead Control for $160
• Material from the appendix to the chapter is marked with an asterisk (*).

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Definitions:

Standard Overhead Rate

The predetermined rate charged for overhead expenses in a standard costing system, based on expected costs and activity levels.

Flexible Overhead Rate

An overhead allocation rate that adjusts for variations in actual activity levels, as opposed to being fixed or static.

Volume Variance

The difference between the expected volume of sales or production and the actual volume, often leading to variations in income or expenses.

Costing Systems

A framework used by organizations to estimate the cost of their products for profitability analysis, inventory valuation, and cost control.