Some Accountants Would Argue That Any Variances from Standard Costs,when

question 134

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.The principal rationale for this treatment is:

• A)This is the treatment required currently under generally accepted accounting principles.
• B)To allocate such variances 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 for the period.
• D)Consistency with current income tax provisions.

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Definitions:

Rate of Compounding

The frequency with which interest is added to the principal balance of an investment, which can significantly affect the total interest earned or paid.

Ordinary Annuity

A series of equal payments made at regular intervals over a specified period of time.

Future Value

The value of a current asset at a specified future date, based on an expected rate of growth or return.

Annuity Due

An annuity for which the payment is due immediately at the beginning of each period, rather than at the end.