Samples 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 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 $140,000 and budgeted activity of 20,000 hours.During the year, the company completed the following transactions:Purchased 49,500 liters of raw material at a price of $8.00 per liter. The materials price variance was $24,750 Favorable.Used 45,820 liters of the raw material to produce 32,800 units of work in process. The materials quantity variance was $850 Favorable.Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 28,440 hours at an average cost of $17.00 per hour. The direct labor rate variance was $28,440 Favorable. The labor efficiency variance was $39,600 Unfavorable.Applied fixed overhead to the 32,800 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 $154,700. Of this total, $83,700 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $71,000 related to depreciation of manufacturing equipment. The fixed manufacturing overhead budget variance was $14,700 Unfavorable. The fixed manufacturing overhead volume variance was $43,680 Favorable.Completed and transferred 32,800 units from work in process to finished goods.Sold (for cash) 32,000 units to customers at a price of $38.20 per unit.Transferred the standard cost associated with the 32,000 units sold from finished goods to cost of goods sold.Paid $133,000 of selling and administrative expenses.Closed all standard cost variances to cost of goods sold.To answer the following questions, it would be advisable to record transactions a through i in the worksheet below. This worksheet is similar to the worksheets in your text except that it has been split into two parts to fit on the page. PP&E (net) stands for Property, Plant, and Equipment net of depreciation.
When the company closes its standard cost variances, the Cost of Goods Sold will increase (decrease) by:

A) $43,420
B) ($28,980)
C) $28,980
D) ($43,420)

Question

Samples 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 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 $140,000 and budgeted activity of 20,000 hours.During the year, the company completed the following transactions:Purchased 49,500 liters of raw material at a price of $8.00 per liter. The materials price variance was $24,750 Favorable.Used 45,820 liters of the raw material to produce 32,800 units of work in process. The materials quantity variance was $850 Favorable.Assigned direct labor costs to work in process. The direct labor workers (who were paid in cash) worked 28,440 hours at an average cost of $17.00 per hour. The direct labor rate variance was $28,440 Favorable. The labor efficiency variance was $39,600 Unfavorable.Applied fixed overhead to the 32,800 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 $154,700. Of this total, $83,700 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $71,000 related to depreciation of manufacturing equipment. The fixed manufacturing overhead budget variance was $14,700 Unfavorable. The fixed manufacturing overhead volume variance was $43,680 Favorable.Completed and transferred 32,800 units from work in process to finished goods.Sold (for cash) 32,000 units to customers at a price of $38.20 per unit.Transferred the standard cost associated with the 32,000 units sold from finished goods to cost of goods sold.Paid $133,000 of selling and administrative expenses.Closed all standard cost variances to cost of goods sold.To answer the following questions, it would be advisable to record transactions a through i in the worksheet below. This worksheet is similar to the worksheets in your text except that it has been split into two parts to fit on the page. PP&E (net) stands for Property, Plant, and Equipment net of depreciation.

When the company closes its standard cost variances, the Cost of Goods Sold will increase (decrease) by:

A) $43,420
B) ($28,980)
C) $28,980
D) ($43,420)

Brooke Waszak · Accepted Answer

Final Answer : D, Explanation :  The total standard cost variances (materials price variance, materials quantity variance, direct labor rate variance, labor efficiency variance, fixed manufacturing overhead budget variance, and fixed manufacturing overhead volume variance) are unfavorable $57,030 ($24,750 + $850 + $28,440 + $39,600 + $14,700 - $43,680). Closing these variances directly to Cost of Goods Sold will decrease Cost of Goods Sold by $57,030, which is equivalent to increasing Cost of Goods Sold by $57,030 * -1 = ($43,420).

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