Asked by Brooke Thompson on Jun 16, 2024
Verified
Scogin 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 76,500 pounds of raw material at a price of $8.70 per pound and used 71,880 pounds of the raw material to produce 19,400 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 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 Work in Process inventory account will increase (decrease) by:
A) ($646,020)
B) $646,020
C) ($646,920)
D) $646,920
Standard Cost System
An accounting system that uses predetermined costs for products and services to help managers control costs by comparing them with actual costs.
Raw Materials
The basic materials and components required to start the production process.
Standard Cost Card
A detailed listing of the standard amounts of inputs and their costs that are required to produce a unit of a specific product.
- Apply standard costing methods to recording transactions in a worksheet.
Verified Answer
CC
Courtney CallahanJun 20, 2024
Final Answer :
B
Explanation :
To calculate the value of raw materials used in production, we need to multiply the amount of raw materials used (71,880 pounds) by the standard cost per pound ($8.10). This gives us a standard cost of $581,448. Since the actual cost of raw materials purchased was $665,550 (76,500 pounds x $8.70 per pound), there is a favorable variance of $84,102 (actual cost - standard cost). This favorable variance is closed directly to Cost of Goods Sold, which reduces the cost of goods sold by $84,102. Therefore, the entry made to record the raw materials used in production is:
Debit Work in Process for $581,448
Credit Raw Materials for $581,448
Since the entry shows an increase in the Work in Process inventory account, the answer is B.
Debit Work in Process for $581,448
Credit Raw Materials for $581,448
Since the entry shows an increase in the Work in Process inventory account, the answer is B.
Learning Objectives
- Apply standard costing methods to recording transactions in a worksheet.