Question
Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which
Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the companys only product contains the following information concerning direct materials: Inputs Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 1.0 pounds $ 5.50 per pound $ 5.50 During the year, the company completed the following transactions concerning direct materials: a. Purchased 19,700 pounds of raw material at a price of $4.70 per pound. b. Used 18,500 pounds of the raw material to produce 18,400 units of work in process. The company calculated the following direct materials variances for the year: Materials price variance $ 15,760 F Materials quantity variance $ 550 U Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation. Cash Raw Materials Work in Process Finished Goods PP&E (net) = Materials Price Variance Materials Quantity Variance Labor Rate Variance Labor Efficiency Variance FOH Budget Variance FOH Volume Variance Retained Earnings 1/1 $1,030,000 $53,350 $0 $88,880 $737,900 = $0 $0 $0 $0 $0 $0 $1,910,130 a. = b. = When recording the raw materials used in production in transaction (b) above, the Raw Materials inventory account will increase (decrease) by:
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