Landoni Corporation Uses a Standard Cost System in Which Inventories

question 107

Multiple Choice

Landoni 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 kilos per unit at $5.00 per kilo or $13.50 per unit. During the year, the company purchased 75,200 kilos of raw material at a price of $4.90 per kilo and used 69,290 kilos of the raw material to produce 25,700 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 purchases, the Raw Materials inventory account will increase (decrease) by:

• A) ($368,480)
• B) $376,000
• C) ($376,000)
• D) $368,480

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Definitions:

True Probability

The actual likelihood of an event occurring, often contrasted with estimated probabilities derived from models or assumptions.

Subjective Probabilities

The individual's personal judgment or estimate of the likelihood of an event occurring, based on their own knowledge and experience.

Event

An occurrence or happening, especially one of significance.

Law of Small Numbers

A cognitive bias that leads people to make unjustified conclusions based on limited data.