XYZ Company Uses Standard Costs for Allocating Costs to Work-In-Process

question 19

Multiple Choice

XYZ Company uses standard costs for allocating costs to work-in-process and finished goods inventory.For the last few months,there have been high variances between total standard costs and actual costs.What is one of the likely reasons for this variance?

• A)The accounting department has been developing the costs.
• B)Production quantities are different than expected.
• C)There is an increase in inventory quantities on hand.
• D)The receiving department has been stockpiling raw materials.

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Definitions:

Activity Level

Pertains to the volume or quantity of work performed or services provided, often related to the operational capacity of a business or project.

Relevant Range

The range of activity or volume over which the assumptions about fixed and variable cost behavior are valid.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Committed Fixed Costs

Expenses that a company has committed to pay over a period, which do not vary with the level of production or sales.