Chapter 23, Problem 4BTN

To determine

Introduction:

Variances Analysis: A Variance analysis is comparing the actual and standard figures and finding the differences or variances. A variance may be favorable or unfavorable.

Cost of goods sold: Cost of goods sold is the total cost allocated to the goods sold.

Gross Margin: Gross Margin is part of the sales revenue balance after subtracting the cost of goods sold. Hence, Gross Margin = Sales Revenue – Cost of Goods Sold

Requirement-1:

To determine: The effect of closing a favorable variance on the cost of goods sold and Gross Margin

To determine

Requirement-2:

To determine: The effect of closing an unfavorable variance on the cost of goods sold and Gross Margin

To determine

Requirement-3:

To determine: The meaning of favorable and unfavorable variance