The Easiest Way to Dispose of Variances at the End

question 15

Multiple Choice

The easiest way to dispose of variances at the end of the period is to

• A)Ignore the variances as they will cancel out during the following period.
• B)Close the variances to raw materials inventory.
• C)Close the variances to the appropriate raw materials inventory,work in process inventory,and finished goods inventory accounts.
• D)Close the variances to the cost of goods sold account.

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Definitions:

ATC

Average Total Cost; this refers to the total cost per unit of output incurred when producing goods or services.

Long-Run Equilibrium

A state in market conditions where all firms in a perfectly competitive industry earn zero economic profit, leading to the optimal distribution of resources in that industry.

MR

Stands for Marginal Revenue, which is the additional revenue gained from selling one more unit of a product or service.

MC

Short for Marginal Cost, it refers to the increase in total cost that arises from producing one additional unit of a good or service.