Which of the following statements is true?

• A single Variance clearing account is used to accumulate the individual variances.

• Closing a favorable variance increases net operating income.

• Closing a favorable variance decreases net operating income.

• Closing an unfavorable variance increases net operating income.

Knowledge Check 01 Lansing Inc.'s cost of goods sold at standard was $15,000. This represents the amount of cost of goods sold before considering the transaction that closes all variance accounts for the period. The company also reported the following in the related columns of its spreadsheet Materials quantity variance Labor rate variance (100) 20 Fixed overhead volume variance 50 What is the amount of the cost of goods sold (after adjustment for the variances) that will be reported on the company's income statement? O$(15,000) $14,970 $15,000 $15,030 Budgeted production (in units) Budgeted machine-hours or denominator activity Actual production Standard hours allowed for the actual output 1,200 6,000 1,500 7,500 Budgeted fixed manufacturing overhead Actual fixed manufacturing overhead $21,000 $22,000 Knowledge Check 01 What is the volume variance? $1,000 U $2,520 U $5,250 F $5,250 U Budgeted production (in units) Budgeted machine-hours or denominator activity 1,200 6,000 Standard hours allowed for the actual output 7,500 Budgeted fixed manufacturing overhead Actual fixed manufacturing overhead $21,000 $22,000 Knowledge Check 01 Assume that machine-hours is used as the overhead allocation base. What is the fixed component of the predetermined overhead rate? $2.80 per machine-hour. $3.00 per machine-hour. $3.14 per machine-hour. $3.50 per machine-hour. XXX Company Actual Hours of Input Actual Hours of Input Standard Hours of Input at Standard Rate at Standard Rate at Actual Rate ( AR) = (2,200 hours x ( SR) (2,200 hours x (SH x SR) (2,000 hours x $2.00) $1.90) $2.00) = Knowledge Check 01 What is the spending variance? $180 F $180 U $4,000 F $4,000 U