Asked by bentley romanski on May 17, 2024
Verified
Income statements prepared internally for management often show cost of goods sold at standard cost and variances are
A) separately disclosed.
B) deducted as other expenses and revenues.
C) added to cost of goods sold.
D) closed directly to retained earnings.
Income Statements
Financial statements that summarize a company's revenue, expenses, and profits over a specific period of time.
Standard Cost
A predetermined cost of manufacturing, delivering, or producing goods or services under normal conditions.
- Examine variance reports to enhance managerial decision-making and their significance for internal reporting.
- Establish the correct approach to variance accounts in the context of financial reporting.
Verified Answer
PG
Peter GichuruMay 23, 2024
Final Answer :
A
Explanation :
Cost of goods sold at standard cost is used for internal management purposes to measure efficiency and identify areas of improvement. Variances from the standard cost are analyzed and separately disclosed to identify the reasons for the variances and take corrective action. This information is critical for management decision making and hence is separately disclosed in the income statement.
Learning Objectives
- Examine variance reports to enhance managerial decision-making and their significance for internal reporting.
- Establish the correct approach to variance accounts in the context of financial reporting.
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