When it comes to using the Customer Return Variance Account on an item how does it really work? I have read the help for it and I'm a little confused. In one part it says it will replace the COGS account for the entire cost of the item, yet in the example it shows that only the variance will be posted here.

In this field, choose the account you want to post variance amounts to for cost variances of items returned by customers. The Customer Return Variance Account takes the place of using the Cost of Goods Sold (COGS) account for the entire cost of the item.
You can set a specific Cost of Goods Sold (COGS) account to use for returns of this item. This enables you to track COGS separately for returns and sales.

For example, a return authorization (RMA) may have a value of $5 for the item. But once the RMA is received, the costing value received is now $4. This generates a difference of $1.

If you select a Customer Return Variance Account, the $1 posts to the account you choose in this field.
If you do not select a Customer Return Variance Account, the $1 posts to the account chosen in the COGS Account field. Note: This is the same field that sales COGS amounts post to.