Drake Company purchased materials on account. The entry to record the purchase of materials having a standard cost of $1.50 per pound from a supplier at $1.60 per pound would include a:
A) credit to Raw Materials Inventory.
B) debit to Work in Process.
C) credit to Materials Price Variance.
D) debit to Materials Price Variance.

Question

Quizplus · Accepted Answer

The entry to record the purchase of materials at a price higher than the standard cost would result in a variance. The debit to Materials Price Variance account indicates an unfavorable variance for paying a higher price than the standard cost. The credit to Accounts Payable account shows the liability created for purchasing materials on account. There is no credit to Raw Materials Inventory or Materials Price Variance and no debit to Work in Process at the time of purchase.

Drake Company Purchased Materials on Account