Some Accountants Would Argue That Any Variances from Standard Costs

question 117

Multiple Choice

Some accountants would argue that any variances from standard costs, when such standards are current, should be written off to Cost of Goods Sold (or other income statement account) . The principal conceptual rationale for this treatment is:

• A) This is the treatment required currently under generally accepted accounting principles in the U.S.
• B) To allocate such variances (as the alternative treatment) implies that asset values on the balance sheet (i.e., inventories) contain the cost of inefficiencies.
• C) The negligible effect this treatment has on total Cost of Goods Sold (or the Income Statement) for the period.
• D) The increased information and insight this procedure provides to management, for better managing operations.
• E) Simplicity of application—this is an expedient method.

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Definitions:

Neurons

Specialized cells in the nervous system that transmit information to other neurons, muscles, or gland cells through electrical and chemical signals.

Metabolic Support

Systems or mechanisms within living organisms that facilitate biochemical processes essential for maintaining life.

Voluntary

Actions or activities done by free choice or decision, without coercion.

Skeletal Only

Describes structures or systems that are comprised solely of bones, often used in the context of anatomical studies.