Question
Why should a production-volume variance (PVV) that is material be prorated among work-in-process, finished goods, cost and cost of goods sold rather than writing it
Why should a production-volume variance (PVV) that is material be prorated among work-in-process, finished goods, cost and cost of goods sold rather than writing it all off to cost of goods sold?
a. | If a PVV is always written off to cost of goods sold, then the assets on the balance sheet would be the same as actual costs. | |
b. | If a PVV is always written off to cost of goods sold, then the liabilities on the balance sheet would be overstated. | |
c. | If a PVV is always written off to cost of goods sold, then the balances in the inventory accounts on the balance sheet would be most accurate. | |
d. | If a PVV is always written off to cost of goods sold, a company could set its standard costs to either increase or decrease operating incomes. |
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