Final answer:
The correct statement is that if the direct materials price variance is immaterial, the variance is typically closed to the Cost of Goods Sold account. This is because COGS represents all the costs involved in producing the goods that are sold, including raw materials.
Step-by-step explanation:
When the direct materials price variance is immaterial, it means that the difference between the actual cost of direct materials and the standard cost of those materials is not significant enough to warrant a separate accounting adjustment. The variance can be closed to different accounts depending on the company’s accounting policy. Generally, immaterial variances are closed to the account that reflects the point in the production process where the materials costs are first accounted for. In this case, Cost of Goods Sold (COGS) is often the account to which immaterial variances are closed because it reflects the total costs that go into producing the goods that are eventually sold.
Therefore, the correct statement is: If the direct material price variance is immaterial, then the variance is closed to Cost of Goods Sold.