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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Definitions:

AFL-CIO Merger

The unification in 1955 of the American Federation of Labor (AFL) and the Congress of Industrial Organizations (CIO), creating the largest federation of unions in the United States.

Industrial Unions

Labor unions that organize workers across entire industries, rather than by craft or trade, to collectively bargain for better terms of employment.

Craft Unions

Unions composed of workers specialized in a particular craft or trade, focusing on specific job skills and worker rights within that profession.

Monopsony Power

A market condition where there is only one buyer for a product or service, giving that buyer considerable control over prices.