Ingredient B4376 is used to make Razor Corporation's major product. The standard cost of Ingredient B4376 is $24.50 per ounce and the standard quantity is 6.1 ounces per unit of output. In the most recent month, 5,030 ounces of the compound were used to make 700 units of the output. When recording the use of materials in production under a standard costing system, Materials Inventory would be:
A) credited for $123,235.
B) debited for $123,235.
C) debited for $104,615.
D) credited for $104,615.

Question

Quizplus · Accepted Answer

The standard cost of Ingredient B4376 is $24.50 per ounce and the standard quantity is 6.1 ounces per unit of output. So, the standard cost of Ingredient B4376 for 700 units of output is 700 units * 6.1 ounces per unit * $24.50 per ounce = $104,615. Since the actual quantity of Ingredient B4376 used was 5,030 ounces, the difference between the actual quantity and the standard quantity is 5,030 ounces - 700 units * 6.1 ounces per unit = 1,130 ounces. The cost of the 1,130 ounces of excess usage is 1,130 ounces * $24.50 per ounce = $27,635. Therefore, the total cost of Ingredient B4376 used in production is $104,615 + $27,635 = $123,235. When recording the use of materials in production under a standard costing system, Materials Inventory would be credited for $123,235.

Ingredient B4376 Is Used to Make Razor Corporation's Major Product