The Allowance for Unrealized Holding Gains That Appears in the Cost

question 9

Multiple Choice

The allowance for unrealized holding gains that appears in the cost of goods sold section of a federal financial statement effectively does which of the following?

• A) Adjusts the latest acquisition cost inventory valuation to the historical cost valuation.
• B) Increases the cost of goods sold by the increase in market value of the inventory.
• C) Decreases the cost of goods sold by the increase in market value of the inventory.
• D) Adjusts the historical cost valuation to the latest acquisition cost inventory valuation.

---

Definitions:

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity according to standards.

Direct Material Used

The raw materials directly incorporated into a product during the manufacturing process.

Variable Manuf. Overhead

Costs associated with the production process that vary with the level of output, such as utility costs and some labor expenses; it’s a focused subset of variable manufacturing costs.

Materials Quantity Variance

A measurement of the difference between the actual quantity of materials used in production and the standard quantity expected to be used, often reflecting efficiency in material usage.