If 20,000 Kilograms of Direct Materials Are Purchased for $14,400 $\begin{array}{llcc} \text { Raw Materials Inventory} & 14,400 \\\text { Accounts Payable }&&14,400 \\\end{array}$

question 87

Short Answer

If 20,000 kilograms of direct materials are purchased for $14,400 on account and the standard cost is $.70 per kilogram, the journal entry to record the purchase under a standard costing system is a)
$\begin{array}{llcc} \text { Raw Materials Inventory} & 14,400 \\\text { Accounts Payable }&&14,400 \\\end{array}$

b)
$\begin{array}{llcc} \text {Work in Process Inventory } &14,400\\ \text { Accounts Payable }&&14,000 \\ \text { Materials Quantity Variance}&&400\end{array}$

$\begin{array}{llcc} \text {Raw Materials Inventory } &14,400\\ \text { Accounts Payable }&&14,000 \\ \text { Materials Price Variance }&&400\end{array}$

d)
$\begin{array}{llcc} \text { Raw Materials Inventory } &14,000 \\ \text { Materials Price Variance } &400\\ \text { Accounts Pavable } &&14,400\end{array}$

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Definitions:

Variable Costs

Costs that vary with the level of output produced.

Fixed Costs

Business expenses that remain constant regardless of the level of production or sales.

Variable Costs

Costs that change in proportion to the business activity or production levels, including raw materials and hourly labor.

Revenues

The total income generated by a company from its business activities before any expenses are subtracted.