Ferrero Corporation Manufactures One Product

question 19

Multiple Choice

Ferrero Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The company has provided the following information:
The company does not have any variable manufacturing overhead costs and it recorded the following variances during the year:
When the company closes its standard cost variances,the Cost of Goods Sold will increase (decrease) by:

• A) $56,580
• B) ($125,916)
• C) ($56,580)
• D) $125,916

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Definitions:

Marginal Cost

The additional cost incurred to produce one additional unit of a good or service.

Average Variable Cost

The variable cost of production (costs that change with output level) divided by the quantity of output produced.

Product Differentiation

A marketing strategy where a company attempts to distinguish its product or services from the competition.

Competitive Price-searcher

A market structure where firms have some control over their selling price because their products are differentiated, but they still face competition.