Sousa Corporation Uses a Standard Cost System in Which Inventories

question 274

Multiple Choice

Sousa 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 2.8 kilos per unit at $7.50 per kilo or $21.00 per unit. During the year, the company purchased 82,100 kilos of raw material at a price of $7.40 per kilo and used 78,020 kilos of the raw material to produce 27,900 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 the raw materials used in production are recorded, which of the following entries will be made?

• A) $750 in the Materials Quantity Variance column
• B) $750 in the Materials Price Variance column
• C) ($750) in the Materials Quantity Variance column
• D) ($750) in the Materials Price Variance column

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