If Inventories in a Business Using a Standard Cost System

question 85

Multiple Choice

If inventories in a business using a standard cost system are insignificant, the firm would be justified (in a practical sense) by disposing of variances each year:

• A) As an adjustment to the finished goods inventory only.
• B) As an adjustment to cost of goods sold only.
• C) As adjustments to both inventory accounts and the cost of goods sold for the period.
• D) As a special item (gain or loss) on the income statement for the period.
• E) As an adjustment to the work-in-process (WIP) inventory only.