Question

(A) If variances are prorated at the end of the accounting period, an unfavorable direct materials price variance will, when prorated, increase the value of the Finished Goods Inventory. (B) Insignificant variances are not generally prorated at the end of the accounting period and are closed to the Cost of Goods Sold. Group of answer choices

Answer 1

Answer:

Both A and B are correct.

Explanation:

Variance analysis help the business to identify the deviation from their budgeted expenditures. The budget cost or volume is analyzed against the actual expenditure or production volume. Variance can be favorable or unfavorable. An unfavorable material price variance will increase the cost of finished goods.