How Should an Efficiency Variance That Is Material in Amount

question 14

Multiple Choice

How should an efficiency variance that is material in amount be treated at the end of an accounting period?

• A)Reported as a deferred charge or credit
• B)Allocated among work in process inventory,finished goods inventory,and cost of goods sold
• C)Charged or credited to cost of goods manufactured
• D)Allocated among cost of goods manufactured,finished goods inventory,and cost of goods sold

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Definitions:

Marginal Cost

The extra cost incurred from the production of an additional unit, emphasizing its role in decision-making processes.

Average Total Cost

The aggregate expense of manufacturing divided by the total number of units produced.

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced.

Average Variable Cost

The total variable cost per unit of output, which includes costs that change with the amount of production.