Favorable Variances Are Contra Expenses and Therefore Decrease Cost of Goods

question 145

True/False

Favorable variances are contra expenses and therefore decrease Cost of Goods Sold.

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Definitions:

Assembly Department

A division within a manufacturing plant where components are put together to create a final product.

Cost Reconciliation Report

A financial report that reconciles estimated costs with actual costs incurred, often used in manufacturing to track material, labor, and overhead costs against budgeted or standard costs.

Work in Process Inventory

Represents the cost of unfinished goods in the production process, including labor, materials, and overhead.

Service Department Costs

The expenses incurred by support departments within a company that do not directly contribute to profit but provide necessary services.