In a standard costing income statement, favorable variances are _____ cost of goods sold at standard cost.

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Multiple Choice

In a standard costing income statement, favorable variances are _____ cost of goods sold at standard cost.

Explanation:
In standard costing, cost of goods sold is shown using the standard cost for the units produced or sold, and variances are tracked separately to show how actual costs compare to that standard. A favorable variance means actual costs were lower than the standard costs, so those savings reduce the amount recorded as cost of goods sold. Therefore, you subtract the favorable variance from the COGS at standard cost to arrive at the COGS that reflects actual performance. For example, if COGS at standard is 100,000 and the favorable variance is 5,000, the COGS reported would be 95,000.

In standard costing, cost of goods sold is shown using the standard cost for the units produced or sold, and variances are tracked separately to show how actual costs compare to that standard. A favorable variance means actual costs were lower than the standard costs, so those savings reduce the amount recorded as cost of goods sold. Therefore, you subtract the favorable variance from the COGS at standard cost to arrive at the COGS that reflects actual performance. For example, if COGS at standard is 100,000 and the favorable variance is 5,000, the COGS reported would be 95,000.

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