When Standard Costs Are Used in a Cost Accounting System

question 97

Multiple Choice

When standard costs are used in a cost accounting system:

• A)A favorable cost variance results when standard amounts are less than actual costs.
• B)Cost variances are shown in the year-end balance sheet as assets,if favorable,or as liabilities,if unfavorable.
• C)Costs charged to the Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold accounts are actual costs.
• D)Costs charged to the Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold accounts are at standard costs.

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Definitions:

Selling Expenses

Costs incurred directly and indirectly from the sale of goods or services, such as advertising, shipping, and sales staff salaries.

Perpetual Inventory System

An inventory management system where inventory levels are updated in real-time with each sale or purchase.

Periodic Inventory System

An inventory management system where the inventory count is conducted at specific intervals to determine the cost of goods sold.

Discount Period

The time frame in which a discount is offered for prompt payment of an invoice, encouraging early payment by customers.