Study the format of the analysis of variances in Exhibit 12-12. Suppose production is 156,000 units. Also
Question:
Study the format of the analysis of variances in Exhibit 12-12. Suppose production is 156,000 units. Also assume the following:
Prepare an analysis of variances similar to that shown in Exhibit 12-12.
Exhibit 12-12 Analysis of Variances
Therefore, in practice, all cost variances are typically regarded as adjustments to current income. Where variances appear on the income statement is generally unimportant. Variances could appear as adjustments to the gross profit figure in the income statement or in a completely separate section elsewhere in the income statement. Placing them in a separate section helps to distinguish between product costing (that is, the cost of goods sold, at standard) and loss recognition (unfavourable variances are “lost ?or “expired costs because they represent waste and inefficiency, thereby not qualifying as inventoriable costs; that is, waste is not an asset). The placement of the variance does not affect operating income.
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Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu