Catherman Corporation Manufactures One Product

question 131

Multiple Choice

Catherman Corporation manufactures one product. It does not maintain any beginning or ending 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.
During the year, the company produced and sold 32,400 units at a price of $42.30 per unit. Its standard cost per unit produced is $36.90 and its selling and administrative expenses totaled $102,000. 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) $34,300
• B) ($34,300)
• C) $66,810
• D) ($66,810)

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Definitions:

Direct Method

An approach to preparing the cash flow statement where actual cash inflows and outflows from operational activities are listed.

Net Cash Flow

It is the difference between a company's cash inflows and outflows within a specified period, indicating the company's liquidity position.

Accrual Basis

An accounting method that recognizes revenues and expenses when they are earned or incurred, regardless of when cash transactions occur.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, ending with net income or loss.