Ladue Corporation Uses a Standard Cost System in Which Inventories

question 97

Multiple Choice

Ladue 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 3.6 kilos per unit at $7.00 per kilo.During the year,the company purchased 67,600 kilos of raw material at a price of $6.40 per kilo and used 60,220 kilos of the raw material to produce 16,700 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 PP&E (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 used in production,the Work in Process inventory account will increase (decrease) by:

• A) $421,540
• B) ($421,540)
• C) $420,840
• D) ($420,840)

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Definitions:

Cash Budget

A cash budget is an estimation of the cash inflows and outflows for a business over a specific period of time, used for managing liquidity and ensuring that the company can meet its financial obligations.

Budgeted Income Statement

A financial statement that projects a company's anticipated revenue, expenses, and profits for a specific period, based on budgeted operations.

Cost of Goods Sold

Cost of goods sold (COGS) is the direct costs attributed to the production of the goods sold by a company, including material and labor costs.

Benefits of Budgeting

The advantages of planning and controlling an organization's or individual's finances, such as better decision-making and financial stability.