Asked by Nazmi Olcar on May 20, 2024
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Neuhaus 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 company's only product is as follows: During the year, the company completed the following transactions:a. Purchased 52,900 gallons of raw material at a price of $7.60 per gallon.b. Used 46,820 gallons of the raw material to produce 27,600 units of work in process.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.
When the purchase of raw materials is recorded in transaction (a) above, which of the following entries will be made?
A) $5,290 in the Materials Price Variance column
B) ($5,290) in the Materials Price Variance column
C) $5,290 in the Materials Quantity Variance column
D) ($5,290) in the Materials Quantity Variance column
Materials Price Variance
The difference between the actual cost of materials used in production and the expected (or standard) cost, reflecting changes in material prices.
Raw Materials Purchases
The total cost incurred from buying raw materials that are to be used in the production process.
Standard Costs
The predetermined costs of manufacturing a single unit or a number of product units during a specific period under current or anticipated operating conditions.
- Analyze the effects of various kinds of variances, including price, quantity, efficiency, and budget, on the process of making financial decisions.
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Learning Objectives
- Analyze the effects of various kinds of variances, including price, quantity, efficiency, and budget, on the process of making financial decisions.
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