If a Company Records Inventory Purchases at Standard Cost and Also

question 147

Essay

If a company records inventory purchases at standard cost and also records purchase price variances, prepare the journal entry for a purchase of widgets that were bought at $7.45 per unit and have a standard cost of $7.15. The total amount owed to the vendor for this purchase is $33,525.

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Definitions:

Price Mechanism

The system by which the prices of goods and services are determined in a free market, based on the principles of supply and demand.

Central Planning Agency

An organization responsible for directing economic activity according to a comprehensive plan, often in a centrally planned economy.

Business Firms

Entities that engage in commercial, industrial, or professional activities with the goal of generating profits for their owners or shareholders.

Equity

Ownership interest in a corporation in the form of common stock or preferred stock, representing a claim on its earnings and assets.