Asked by Deanne Pawhay on Jun 11, 2024
Verified
Colbeck Corporation uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.The standard cost card for the company's only product is as follows: 
During the year, the company purchased 68,000 gallons of raw material at a price of $5.40 per gallon and used 62,660 gallons of the raw material to produce 18,400 units of work in process. Assume that all transactions are recorded on a worksheet as shown in the text.On the left-hand side of the equals sign in the worksheet are columns for Cash, Raw Materials, Work in Process, Finished Goods, and PP&E (net) .All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.
When recording the raw materials used in production, the Raw Materials inventory account will increase (decrease) by:
A) ($375,960)
B) $375,960
C) ($338,364)
D) $338,364
Raw Materials
Basic substances in their natural, modified, or semi-processed states used as inputs for production.
Standard Cost System
An accounting method that uses cost standards for material, labor, and overhead charges to control costs and assess operational efficiency.
- Comprehend the recording of raw material transactions and their effect on inventory accounts.
Verified Answer
PS
PAULINE SANTOSJun 17, 2024
Final Answer :
A
Explanation :
Raw Materials decreases by the standard cost of the raw materials used in production, which is AQ × SP = 62,660 gallons × $6.00 per gallon = $375,960.
Learning Objectives
- Comprehend the recording of raw material transactions and their effect on inventory accounts.