Asked by Morgan Young on Apr 24, 2024
Lisser 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 standards for direct materials for the company's only product specify 2.7 liters per unit at $7.50 per liter or $20.25 per unit. During the year, the company purchased 67,300 liters of raw material at a price of $8.00 per liter and used 61,660 liters of the raw material to produce 22,800 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 Property, Plant, and Equipment (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) ($493,280)
B) $493,280
C) $462,450
D) ($462,450)
Standard Cost System
An accounting system that assigns predetermined costs to products and services, which are then compared to actual costs for variance analysis.
Direct Materials
Raw materials that are directly traceable to the manufacturing of a product and are a significant portion of production costs.
Raw Materials Inventory
The stock of basic materials that are used in production but have not yet been processed.
- Comprehend the methodology for computing variances in materials price and quantity.
- Implement conventional costing techniques for documenting transactions in a spreadsheet.
Learning Objectives
- Comprehend the methodology for computing variances in materials price and quantity.
- Implement conventional costing techniques for documenting transactions in a spreadsheet.