Juliano 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 29,700 pounds of raw material at a price of $5.20 per pound and used 25,700 pounds of the raw material to produce 17,200 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 the raw materials used in production are recorded,which of the following entries will be made?
A) $600 in the Materials Price Variance column
B) $600 in the Materials Quantity Variance column
C) ($600) in the Materials Price Variance column
D) ($600) in the Materials Quantity Variance column

Question

Juliano 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 29,700 pounds of raw material at a price of $5.20 per pound and used 25,700 pounds of the raw material to produce 17,200 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 the raw materials used in production are recorded,which of the following entries will be made?
A) $600 in the Materials Price Variance column 
B) $600 in the Materials Quantity Variance column 
C) ($600) in the Materials Price Variance column 
D) ($600) in the Materials Quantity Variance column

Quizplus · Accepted Answer

The materials price variance is recorded when materials are purchased; the materials quantity variance is recorded when raw materials are used.
Materials quantity variance:
SQ = Actual output × Standard quantity = 17,200 units × 1.5 pounds per unit = 25,800 pounds
Materials quantity variance = (AQ - SQ) × SP
= (25,700 pounds - 25,800 pounds) × $6.00 per pound
= (-100 pounds) × $6.00 per pound
= $600 F
Favorable variances are entered in the worksheet as positive entries and unfavorable variances as negative entries.

Juliano Corporation Uses a Standard Cost System in Which Inventories