Question & Answer: A company uses a standard cost system. During the past year, the variances from standard were significant. The company is considering whether to all…..

A company uses a standard cost system. During the past year, the variances from standard were significant. The company is considering whether to allocate the variances among the appropriate inventory accounts and cost of goods sold or to allocate all of the variances directly to cost of goods sold. Under which one of the following situations would reported net income be largest? A. All of the variances are favorable and are written off directly to cost of goods sold. B. All of the variances are unfavorable and are written off directly to cost of goods sold. C. All of the variances are favorable and are allocated among cost of goods sold and ending inventory D. All of the variances are unfavorable and are allocated among cost of goods sold and ending inventory accounts accounts.