Standard Costs and Prorating Variances—MultipleChoice: A Company used a traditional standard cost system in accounting for the cost of production of its only product, product A. The standards for the production of one unit of product A are as follows:

There were no inventories on hand on July l . Following is a summary of costs and related data for the production of product A during the month ended July 31:

On July 31, there are 22,000 feet of item 1; 4,000 feet of item 2; and 2,000 completed units of product A on hand. All direct materials purchases and transfers are debited at standard.

Required:

Choose the best answers (or indicate "none of the above"):

a. For the month ended July 31, the total debits to the Direct Materials Inventory account for the purchase of item 1 would be:

(1) $75,000. (2) $78,000. (3) $58,500. (4) $60,000.

b. For the month ended July 3 1 , the total debits to the Work in Process account for direct labor would be:

(1) $496,000. (2) $465,000. (3) $480,000. (4) $512,000.

c. Before prorating variances, the balance in the Material Efficiency Variance account for item 2 was:

(1) $1,000 credit. (2) $2,600 debit. (3) $600 debit. (4) $2,000 debit.

d. If all variances were prorated to Inventories and Cost of Goods Sold, the amount of material efficiency variance for item 2 to be prorated to Raw Materials Inventory would be:

(1) $0. (2) $333 credit. (3) $333 debit. (4) $500 debit.

e. If all variances were prorated to Inventories and Cost of Goods Sold, the amount of material price variance for item 1 to be prorated to Raw Materials Inventory would be:

(1) $0. (2) $647 debit. (3) $600 debit. (4) $660 debit.

Transcribed Image Text:

Direct materials: 10 feet of item 1 at $.75 per foot and 3 feet of item 2 at $1.00 per foot. Direct labor: 4 hours at $15.00 per hour. Manufacturing overhead: Applied at 150 percent of standard direct labor costs.