Question

In a system designed to measure cost variances, goods transferred from the Work in Process account to the Finished Goods Inventory are valued at:

A) The lower of actual cost or market value.
B) Actual cost.
C) Market value.
D) Standard cost.

Answer 1

D. Standard Cost.

Step-by-step explanation:

Standard cost is been used as a target cost and are been developed from historical data analysis.

In this system/setting, the standard costs of the manufacturing activities will be recorded in the inventories and the cost of goods sold accounts. Since the company must pay its vendors and production workers the actual costs incurred, there are likely to be some differences. The differences between the standard costs and the actual manufacturing costs are referred to as cost variances and will be recorded in separate variance accounts.