Question

ABC company uses a standard costing system. In April 2019, $1,000 of unfavorable price variance and $2,000 of favorable efficiency variance for direct labor were recorded. In addition, the company recorded $2,500 of unfavorable variable overhead flexible budget variance and $3,000 of favorable fixed overhead variance. The company makes year-end adjustments to close all variances into the cost of goods sold account. Which of the following journal entries would have been recorded for April?

Group of answer choices

Debit cost of goods sold for $1,500

Credit cost of goods sold for $1,500

Debit cost of goods sold for $8,500

Credit direct labor efficiency variance for $2,000

Answer 1

Correct Answer: Option B ) Credit cost of goods sold for $1,500
Corrected entry is :
Accounts Title and Explanation	Debit	Credit
Labor efficiency variance	2,000
Fixed Overhead variance	3,000
Labor price variance		1,000
Variable Overhead Variance		2,500
Cost of Goods sold		1,500
(To record variance account closed to cost of goods sold account)