We have our labor set up as a L type inventory item. I take my actual labor divided by actual hours worked to come up with a standard cost for labor, same for O/H. On my income statement the absorbed labor & O/H is lower than the actual labor & O/H cost. I make a month end adjustment to the COGS WIP Variance, Labor & O/H Variance accts which of course brings my COGS % up. My question is: COGS comes from the shipments invoiced for the month, so if we have a poor month for sales but same labor & O/H cost would you still adjust to COGS Variance Accts even tho the product has not shipped? I double checked actual labor & hours to make sure that my standard labor & O/H cost were priced accurately in inventory cost.