Asked by tushig amarjargal on May 12, 2024
Verified
Gathman Corporation manufactures one product. It does not maintain any beginning or ending Work in Process 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. There is no variable manufacturing overhead. The company's balance sheet at the beginning of the year was as follows:
The standard cost card for the company's only product is as follows:
The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $114,000 and budgeted activity of 20,000 hours.
During the year, the company completed the following transactions:Purchased 31,300 pounds of raw material at a price of $3.70 per pound.Used 32,140 pounds of the raw material to produce 17,800 units of work in process.Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 15,240 hours at an average cost of $23.00 per hour.Applied fixed overhead to the 17,800 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $133,100. Of this total, $28,270 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $104,830 related to depreciation of manufacturing equipment.Transferred 17,800 units from work in process to finished goods.Sold for cash 17,600 units to customers at a price of $62.00 per unit.Completed and transferred the standard cost associated with the 17,600 units sold from finished goods to cost of goods sold.Paid $73,360 of selling and administrative expenses.Closed all standard cost variances to cost of goods sold.Required:1. Compute all direct materials, direct labor, and fixed overhead variances for the year.2. Enter the beginning balances and record the above transactions in the worksheet that appears below.
3. Determine the ending balance (e.g., 12/31 balance) in each account.4. Prepare an income statement for the year.
Direct Labor
The wages and benefits for employees directly involved in manufacturing a product.
Fixed Overhead
The portion of overhead costs that remains constant regardless of the level of production or business activity, such as rent, salaries, and insurance.
Work in Process
Inventory consisting of items in production that are not yet completed, part of the manufacturing process costs including labor, materials, and overhead.
- Enhance your proficiency in the precise documentation of transactions in a standard costing system.
- Gain the ability to compute variances between actual costs and standard costs, including direct materials, direct labor, and fixed overhead variances.
- Know how to prepare and analyze an income statement for manufacturing companies using standard costing.
Verified Answer
MS
Maria SantanaMay 13, 2024
Final Answer :
1. Materials price variance = Actual quantity × (Average price − Standard price)= {{[a(19)]:#,###}} pounds × (${{[a(20)]:#,###.00}} per pound − ${{[a(4)]:#,###.00}} per pound)= {{[a(19)]:#,###}} pounds × (−$0.30 per pound)= ${{[a(11)]:#,###}} FavorableMaterials quantity variance:Standard quantity = Actual output × Standard quantity = {{[a(22)]:#,###}} units × {{[a(1)]:#,###.0}} pounds per unit = {{[a(44)]:#,###}} poundsMaterials quantity variance = (Actual quantity − Standard quantity) × Standard price= ({{[a(21)]:#,###}} pounds − {{[a(44)]:#,###}} pounds) × ${{[a(4)]:#,###.00}} per pound= (100 pounds) × ${{[a(4)]:#,###.00}} per pound= ${{[a(46)]:#,###}}UnfavorableLabor rate variance = Actual hours × (Actual rate − Standard rate)= {{[a(13)]:#,###}} hours × (${{[a(24)]:#,###.00}} per hour − ${{[a(5)]:#,###.00}} per hour)= {{[a(13)]:#,###}} hours × (−$1.00 per hour)= ${{[a(13)]:#,###}} FavorableLabor efficiency variance:Standard hours = Actual output × Standard quantity = {{[a(22)]:#,###}} units × {{[a(2)]:#,##0.00}} hours per unit = {{[a(53)]:#,###}} hoursLabor efficiency variance = (Actual hours − Standard hours) × Standard rate= ({{[a(13)]:#,###}} hours − {{[a(53)]:#,###}} hours) × ${{[a(5)]:#,###.00}} per hour= (1,000 hours) × ${{[a(5)]:#,###.00}} per hour= ${{[a(14)]:#,###}} UnfavorableBudget variance = Actual fixed overhead − Budgeted fixed overhead= ${{[a(26)]:#,###}} − ${{[a(17)]:#,###}}= ${{[a(70)]:#,###}} UnfavorableVolume variance = Budgeted fixed overhead − Fixed overhead applied to work in process= ${{[a(17)]:#,###}} − ({{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour)= ${{[a(17)]:#,###}} − (${{[a(54)]:#,###}})= ${{[a(16)]:#,###}} Unfavorable2. and 3.
![1. Materials price variance = Actual quantity × (Average price − Standard price)= {{[a(19)]:#,###}} pounds × (${{[a(20)]:#,###.00}} per pound − ${{[a(4)]:#,###.00}} per pound)= {{[a(19)]:#,###}} pounds × (−$0.30 per pound)= ${{[a(11)]:#,###}} FavorableMaterials quantity variance:Standard quantity = Actual output × Standard quantity = {{[a(22)]:#,###}} units × {{[a(1)]:#,###.0}} pounds per unit = {{[a(44)]:#,###}} poundsMaterials quantity variance = (Actual quantity − Standard quantity) × Standard price= ({{[a(21)]:#,###}} pounds − {{[a(44)]:#,###}} pounds) × ${{[a(4)]:#,###.00}} per pound= (100 pounds) × ${{[a(4)]:#,###.00}} per pound= ${{[a(46)]:#,###}}UnfavorableLabor rate variance = Actual hours × (Actual rate − Standard rate)= {{[a(13)]:#,###}} hours × (${{[a(24)]:#,###.00}} per hour − ${{[a(5)]:#,###.00}} per hour)= {{[a(13)]:#,###}} hours × (−$1.00 per hour)= ${{[a(13)]:#,###}} FavorableLabor efficiency variance:Standard hours = Actual output × Standard quantity = {{[a(22)]:#,###}} units × {{[a(2)]:#,##0.00}} hours per unit = {{[a(53)]:#,###}} hoursLabor efficiency variance = (Actual hours − Standard hours) × Standard rate= ({{[a(13)]:#,###}} hours − {{[a(53)]:#,###}} hours) × ${{[a(5)]:#,###.00}} per hour= (1,000 hours) × ${{[a(5)]:#,###.00}} per hour= ${{[a(14)]:#,###}} UnfavorableBudget variance = Actual fixed overhead − Budgeted fixed overhead= ${{[a(26)]:#,###}} − ${{[a(17)]:#,###}}= ${{[a(70)]:#,###}} UnfavorableVolume variance = Budgeted fixed overhead − Fixed overhead applied to work in process= ${{[a(17)]:#,###}} − ({{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour)= ${{[a(17)]:#,###}} − (${{[a(54)]:#,###}})= ${{[a(16)]:#,###}} Unfavorable2. and 3. The explanations for transactions a through i are as follows:Cash decreases by the actual cost of the raw materials purchased, which is Actual quantity × Average price = {{[a(19)]:#,###}} pounds × ${{[a(20)]:#,###.00}} per pound = ${{[a(39)]:#,###}}. Raw Materials increase by the standard cost of the raw materials purchased, which is Actual quantity × Standard price = {{[a(19)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(40)]:#,###}}. The materials price variance is ${{[a(41)]:#,###}} Favorable.Raw Materials decrease by the standard cost of the raw materials used in production, which is Actual quantity × Standard price = {{[a(21)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(43)]:#,###}}. Work in Process increases by the standard cost of the standard quantity of raw materials allowed for the actual output, which is Standard quantity × Standard price = ({{[a(25)]:#,###}} units × {{[a(1)]:#,###.0}} pounds per unit) × ${{[a(4)]:#,###.00}} per pound = {{[a(44)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(45)]:#,###}}. The difference is the Materials Quantity Variance which is ${{[a(46)]:#,###}} Unfavorable.Cash decreases by the actual amount paid to direct laborers, which is Actual hours × Actual rate = {{[a(23)]:#,###}} hours × ${{[a(24)]:#,###.00}} per hour = ${{[a(47)]:#,###}}. Work in Process increases by the standard cost of the standard amount of hours allowed for the actual output, which is Standard hours × Standard rate = ({{[a(25)]:#,###}} units × {{[a(2)]:#,##0.00}} hours per unit) × ${{[a(5)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(5)]:#,###.00}} per hour = ${{[a(49)]:#,###}}. The difference consists of the Labor Rate Variance which is ${{[a(23)]:#,###}} Favorable and the Labor Efficiency Variance which is ${{[a(14)]:#,###}} Unfavorable.Cash decreases by the actual amount paid for various fixed overhead costs, which is ${{[a(27)]:#,###}}. Work in Process increases by the standard amount of hours allowed for the actual output multiplied by the predetermined overhead rate, which is ({{[a(22)]:#,###}} units × {{[a(3)]:#,##0.00}} hours per unit) × ${{[a(6)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour = ${{[a(54)]:#,###}}. Property, Plant, and Equipment (net) decreases by the amount of depreciation for the period, which is ${{[a(28)]:#,###}}. The difference is the Fixed Overhead (FOH) Budget Variance which is ${{[a(70)]:#,###}} Unfavorable and the Fixed Overhead (FOH) Volume Variance which is ${{[a(16)]:#,###}} Unfavorable.Work in Process decreases by the number of units transferred to Finished Goods multiplied by the standard cost per unit = {{[a(22)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(55)]:#,###}}. Finished Goods increases by the same amount.Cash increases by the number of units sold multiplied by the selling price per unit, which is {{[a(30)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(56)]:#,###}}. Retained Earnings increases by the same amount.Finished Goods decreases by the number of units sold multiplied by their standard cost per unit, which is {{[a(30)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(57)]:#,###.00}}. Retained Earnings decreases by the same amount.Cash and Retained Earnings decrease by ${{[a(58)]:#,###}} to record the selling and administrative expenses.All variance accounts take their balance to zero and they are closed to Cost of Goods Sold (which resides within Retained Earnings).4.](https://d2lvgg3v3hfg70.cloudfront.net/TB8314/11eb6b8f_63a5_8801_bf83_e77115dcf6d1_TB8314_00.jpg)
The explanations for transactions a through i are as follows:Cash decreases by the actual cost of the raw materials purchased, which is Actual quantity × Average price = {{[a(19)]:#,###}} pounds × ${{[a(20)]:#,###.00}} per pound = ${{[a(39)]:#,###}}. Raw Materials increase by the standard cost of the raw materials purchased, which is Actual quantity × Standard price = {{[a(19)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(40)]:#,###}}. The materials price variance is ${{[a(41)]:#,###}} Favorable.Raw Materials decrease by the standard cost of the raw materials used in production, which is Actual quantity × Standard price = {{[a(21)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(43)]:#,###}}. Work in Process increases by the standard cost of the standard quantity of raw materials allowed for the actual output, which is Standard quantity × Standard price = ({{[a(25)]:#,###}} units × {{[a(1)]:#,###.0}} pounds per unit) × ${{[a(4)]:#,###.00}} per pound = {{[a(44)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(45)]:#,###}}. The difference is the Materials Quantity Variance which is ${{[a(46)]:#,###}} Unfavorable.Cash decreases by the actual amount paid to direct laborers, which is Actual hours × Actual rate = {{[a(23)]:#,###}} hours × ${{[a(24)]:#,###.00}} per hour = ${{[a(47)]:#,###}}. Work in Process increases by the standard cost of the standard amount of hours allowed for the actual output, which is Standard hours × Standard rate = ({{[a(25)]:#,###}} units × {{[a(2)]:#,##0.00}} hours per unit) × ${{[a(5)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(5)]:#,###.00}} per hour = ${{[a(49)]:#,###}}. The difference consists of the Labor Rate Variance which is ${{[a(23)]:#,###}} Favorable and the Labor Efficiency Variance which is ${{[a(14)]:#,###}} Unfavorable.Cash decreases by the actual amount paid for various fixed overhead costs, which is ${{[a(27)]:#,###}}. Work in Process increases by the standard amount of hours allowed for the actual output multiplied by the predetermined overhead rate, which is ({{[a(22)]:#,###}} units × {{[a(3)]:#,##0.00}} hours per unit) × ${{[a(6)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour = ${{[a(54)]:#,###}}. Property, Plant, and Equipment (net) decreases by the amount of depreciation for the period, which is ${{[a(28)]:#,###}}. The difference is the Fixed Overhead (FOH) Budget Variance which is ${{[a(70)]:#,###}} Unfavorable and the Fixed Overhead (FOH) Volume Variance which is ${{[a(16)]:#,###}} Unfavorable.Work in Process decreases by the number of units transferred to Finished Goods multiplied by the standard cost per unit = {{[a(22)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(55)]:#,###}}. Finished Goods increases by the same amount.Cash increases by the number of units sold multiplied by the selling price per unit, which is {{[a(30)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(56)]:#,###}}. Retained Earnings increases by the same amount.Finished Goods decreases by the number of units sold multiplied by their standard cost per unit, which is {{[a(30)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(57)]:#,###.00}}. Retained Earnings decreases by the same amount.Cash and Retained Earnings decrease by ${{[a(58)]:#,###}} to record the selling and administrative expenses.All variance accounts take their balance to zero and they are closed to Cost of Goods Sold (which resides within Retained Earnings).4.
![1. Materials price variance = Actual quantity × (Average price − Standard price)= {{[a(19)]:#,###}} pounds × (${{[a(20)]:#,###.00}} per pound − ${{[a(4)]:#,###.00}} per pound)= {{[a(19)]:#,###}} pounds × (−$0.30 per pound)= ${{[a(11)]:#,###}} FavorableMaterials quantity variance:Standard quantity = Actual output × Standard quantity = {{[a(22)]:#,###}} units × {{[a(1)]:#,###.0}} pounds per unit = {{[a(44)]:#,###}} poundsMaterials quantity variance = (Actual quantity − Standard quantity) × Standard price= ({{[a(21)]:#,###}} pounds − {{[a(44)]:#,###}} pounds) × ${{[a(4)]:#,###.00}} per pound= (100 pounds) × ${{[a(4)]:#,###.00}} per pound= ${{[a(46)]:#,###}}UnfavorableLabor rate variance = Actual hours × (Actual rate − Standard rate)= {{[a(13)]:#,###}} hours × (${{[a(24)]:#,###.00}} per hour − ${{[a(5)]:#,###.00}} per hour)= {{[a(13)]:#,###}} hours × (−$1.00 per hour)= ${{[a(13)]:#,###}} FavorableLabor efficiency variance:Standard hours = Actual output × Standard quantity = {{[a(22)]:#,###}} units × {{[a(2)]:#,##0.00}} hours per unit = {{[a(53)]:#,###}} hoursLabor efficiency variance = (Actual hours − Standard hours) × Standard rate= ({{[a(13)]:#,###}} hours − {{[a(53)]:#,###}} hours) × ${{[a(5)]:#,###.00}} per hour= (1,000 hours) × ${{[a(5)]:#,###.00}} per hour= ${{[a(14)]:#,###}} UnfavorableBudget variance = Actual fixed overhead − Budgeted fixed overhead= ${{[a(26)]:#,###}} − ${{[a(17)]:#,###}}= ${{[a(70)]:#,###}} UnfavorableVolume variance = Budgeted fixed overhead − Fixed overhead applied to work in process= ${{[a(17)]:#,###}} − ({{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour)= ${{[a(17)]:#,###}} − (${{[a(54)]:#,###}})= ${{[a(16)]:#,###}} Unfavorable2. and 3. The explanations for transactions a through i are as follows:Cash decreases by the actual cost of the raw materials purchased, which is Actual quantity × Average price = {{[a(19)]:#,###}} pounds × ${{[a(20)]:#,###.00}} per pound = ${{[a(39)]:#,###}}. Raw Materials increase by the standard cost of the raw materials purchased, which is Actual quantity × Standard price = {{[a(19)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(40)]:#,###}}. The materials price variance is ${{[a(41)]:#,###}} Favorable.Raw Materials decrease by the standard cost of the raw materials used in production, which is Actual quantity × Standard price = {{[a(21)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(43)]:#,###}}. Work in Process increases by the standard cost of the standard quantity of raw materials allowed for the actual output, which is Standard quantity × Standard price = ({{[a(25)]:#,###}} units × {{[a(1)]:#,###.0}} pounds per unit) × ${{[a(4)]:#,###.00}} per pound = {{[a(44)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(45)]:#,###}}. The difference is the Materials Quantity Variance which is ${{[a(46)]:#,###}} Unfavorable.Cash decreases by the actual amount paid to direct laborers, which is Actual hours × Actual rate = {{[a(23)]:#,###}} hours × ${{[a(24)]:#,###.00}} per hour = ${{[a(47)]:#,###}}. Work in Process increases by the standard cost of the standard amount of hours allowed for the actual output, which is Standard hours × Standard rate = ({{[a(25)]:#,###}} units × {{[a(2)]:#,##0.00}} hours per unit) × ${{[a(5)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(5)]:#,###.00}} per hour = ${{[a(49)]:#,###}}. The difference consists of the Labor Rate Variance which is ${{[a(23)]:#,###}} Favorable and the Labor Efficiency Variance which is ${{[a(14)]:#,###}} Unfavorable.Cash decreases by the actual amount paid for various fixed overhead costs, which is ${{[a(27)]:#,###}}. Work in Process increases by the standard amount of hours allowed for the actual output multiplied by the predetermined overhead rate, which is ({{[a(22)]:#,###}} units × {{[a(3)]:#,##0.00}} hours per unit) × ${{[a(6)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour = ${{[a(54)]:#,###}}. Property, Plant, and Equipment (net) decreases by the amount of depreciation for the period, which is ${{[a(28)]:#,###}}. The difference is the Fixed Overhead (FOH) Budget Variance which is ${{[a(70)]:#,###}} Unfavorable and the Fixed Overhead (FOH) Volume Variance which is ${{[a(16)]:#,###}} Unfavorable.Work in Process decreases by the number of units transferred to Finished Goods multiplied by the standard cost per unit = {{[a(22)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(55)]:#,###}}. Finished Goods increases by the same amount.Cash increases by the number of units sold multiplied by the selling price per unit, which is {{[a(30)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(56)]:#,###}}. Retained Earnings increases by the same amount.Finished Goods decreases by the number of units sold multiplied by their standard cost per unit, which is {{[a(30)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(57)]:#,###.00}}. Retained Earnings decreases by the same amount.Cash and Retained Earnings decrease by ${{[a(58)]:#,###}} to record the selling and administrative expenses.All variance accounts take their balance to zero and they are closed to Cost of Goods Sold (which resides within Retained Earnings).4.](https://d2lvgg3v3hfg70.cloudfront.net/TB8314/11eb6b8f_63a5_8802_bf83_c9596305d3a3_TB8314_00.jpg)
The explanations for transactions a through i are as follows:Cash decreases by the actual cost of the raw materials purchased, which is Actual quantity × Average price = {{[a(19)]:#,###}} pounds × ${{[a(20)]:#,###.00}} per pound = ${{[a(39)]:#,###}}. Raw Materials increase by the standard cost of the raw materials purchased, which is Actual quantity × Standard price = {{[a(19)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(40)]:#,###}}. The materials price variance is ${{[a(41)]:#,###}} Favorable.Raw Materials decrease by the standard cost of the raw materials used in production, which is Actual quantity × Standard price = {{[a(21)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(43)]:#,###}}. Work in Process increases by the standard cost of the standard quantity of raw materials allowed for the actual output, which is Standard quantity × Standard price = ({{[a(25)]:#,###}} units × {{[a(1)]:#,###.0}} pounds per unit) × ${{[a(4)]:#,###.00}} per pound = {{[a(44)]:#,###}} pounds × ${{[a(4)]:#,###.00}} per pound = ${{[a(45)]:#,###}}. The difference is the Materials Quantity Variance which is ${{[a(46)]:#,###}} Unfavorable.Cash decreases by the actual amount paid to direct laborers, which is Actual hours × Actual rate = {{[a(23)]:#,###}} hours × ${{[a(24)]:#,###.00}} per hour = ${{[a(47)]:#,###}}. Work in Process increases by the standard cost of the standard amount of hours allowed for the actual output, which is Standard hours × Standard rate = ({{[a(25)]:#,###}} units × {{[a(2)]:#,##0.00}} hours per unit) × ${{[a(5)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(5)]:#,###.00}} per hour = ${{[a(49)]:#,###}}. The difference consists of the Labor Rate Variance which is ${{[a(23)]:#,###}} Favorable and the Labor Efficiency Variance which is ${{[a(14)]:#,###}} Unfavorable.Cash decreases by the actual amount paid for various fixed overhead costs, which is ${{[a(27)]:#,###}}. Work in Process increases by the standard amount of hours allowed for the actual output multiplied by the predetermined overhead rate, which is ({{[a(22)]:#,###}} units × {{[a(3)]:#,##0.00}} hours per unit) × ${{[a(6)]:#,###.00}} per hour = {{[a(48)]:#,###}} hours × ${{[a(6)]:#,###.00}} per hour = ${{[a(54)]:#,###}}. Property, Plant, and Equipment (net) decreases by the amount of depreciation for the period, which is ${{[a(28)]:#,###}}. The difference is the Fixed Overhead (FOH) Budget Variance which is ${{[a(70)]:#,###}} Unfavorable and the Fixed Overhead (FOH) Volume Variance which is ${{[a(16)]:#,###}} Unfavorable.Work in Process decreases by the number of units transferred to Finished Goods multiplied by the standard cost per unit = {{[a(22)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(55)]:#,###}}. Finished Goods increases by the same amount.Cash increases by the number of units sold multiplied by the selling price per unit, which is {{[a(30)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(56)]:#,###}}. Retained Earnings increases by the same amount.Finished Goods decreases by the number of units sold multiplied by their standard cost per unit, which is {{[a(30)]:#,###}} units × ${{[a(10)]:#,###.00}} per unit = ${{[a(57)]:#,###.00}}. Retained Earnings decreases by the same amount.Cash and Retained Earnings decrease by ${{[a(58)]:#,###}} to record the selling and administrative expenses.All variance accounts take their balance to zero and they are closed to Cost of Goods Sold (which resides within Retained Earnings).4.
Learning Objectives
- Enhance your proficiency in the precise documentation of transactions in a standard costing system.
- Gain the ability to compute variances between actual costs and standard costs, including direct materials, direct labor, and fixed overhead variances.
- Know how to prepare and analyze an income statement for manufacturing companies using standard costing.