Tulip Inc.uses standard costing,and its manufacturing standards are as follows: 2 pounds of materials at $13 per pound,and 3 hours of labor at $10 per hour.Budgeted production last period was 5,000 units,and actual production and sales was 4,800 units.Last period,Tulip purchased and used 9,800 pounds of materials for $135,000,and used 15,000 labor hours,costing $145,000.What is the journal entry to record the transfer of materials to the Cost of Goods Sold account?

Question

Quizplus · Accepted Answer

The transfer of materials to the Cost of Goods Sold account reflects the usage of materials in the production process. Based on the information given, total materials used in the production of 4,800 units were 2 pounds x 4,800 units = 9,600 pounds. To calculate the cost of materials, the actual cost per pound of materials needs to be determined: 
Actual cost per pound = $135,000 ÷ 9,800 pounds = $13.78/pound

Therefore, the cost of 9,600 pounds of materials is: 
9,600 pounds x $13.78 per pound = $132,288

The journal entry to record the transfer of materials to the Cost of Goods Sold account is as follows:

Debit: Cost of Goods Sold $132,288 
Credit: Raw Materials Inventory $132,288

This entry reduces the Raw Materials Inventory account (which was previously debited for the purchase) and recognizes the cost of materials used in the production of 4,800 units as an expense in the Cost of Goods Sold account.

Tulip IncUses Standard Costing,and Its Manufacturing Standards Are as Follows: 2