Baldwin, Inc uses a standard job cost system and purchased 25,000 kg of material at $6 per kg, and used it all. The standard amount allowed for the output achieved is 22,500 kg, and the standard price is $6.50 per kg. The company also incurred 37,500 direct labour hours for $450,000. The standard hourly price was $11 per hour, and 39,000 hours were allowed at standard. Assuming all variances are immaterial, answer the following questions:
The entry to record the direct material price variance will include a:
A) Debit to materials inventory for $ \$ 150,000 $
B) Debit to account payable for $ \$ 162,500 $
C) Cre dit to the price variance for $ \$ 12,500 $
D) Debit to the price variance for $ \$ 16,250 $

Question

Baldwin, Inc uses a standard job cost system and purchased 25,000 kg of material at $6 per kg, and used it all. The standard amount allowed for the output achieved is 22,500 kg, and the standard price is $6.50 per kg. The company also incurred 37,500 direct labour hours for $450,000. The standard hourly price was $11 per hour, and 39,000 hours were allowed at standard. Assuming all variances are immaterial, answer the following questions:
The entry to record the direct material price variance will include a: 
A) Debit to materials inventory for $ \$ 150,000 $
B) Debit to account payable for $ \$ 162,500 $
C) Cre dit to the price variance for $ \$ 12,500 $
D) Debit to the price variance for $ \$ 16,250 $

Quizplus · Accepted Answer

The direct material price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. Here, it is ($6 - $6.50) x 25,000 kg = -$12,500, which is a favorable variance, hence a credit.

Baldwin, Inc Uses a Standard Job Cost System and Purchased $150,000 \$ 150,000 $150,000

Baldwin, Inc Uses a Standard Job Cost System and Purchased $\$ 150,000$