Colbeck Corporation Uses a Standard Cost System in Which Inventories

question 35

Multiple Choice

Colbeck 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 standard cost card for the company's only product is as follows: During the year, the company purchased 68,000 gallons of raw material at a price of $5.40 per gallon and used 62,660 gallons of the raw material to produce 18,400 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 Raw Materials inventory account will increase (decrease) by:

• A)($375,960)
• B)$375,960
• C)($338,364)
• D)$338,364

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Definitions:

Unit Costs

The cost incurred to produce, store, or purchase one unit of a product or service.

Standard Costing Systems

Accounting methods that use standard costs for direct materials, labor, and overhead to assess the efficiency of operations.

Cost Minimisation

A business strategy aimed at reducing expenses to improve profitability without compromising on the quality of the products or services offered.

Predetermined Manufacturing Overhead Rates

Rates used to allocate manufacturing overhead costs to products, calculated before the actual costs or activity levels are known.