Scogin 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 76,500 pounds of raw material at a price of $8.70 per pound and used 71,880 pounds of the raw material to produce 19,400 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 Property, Plant, and Equipment (net). All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.When recording the raw materials used in production, the Work in Process inventory account will increase (decrease) by:
A) ($646,020)
B) $646,020
C) ($646,920)
D) $646,920

Question

Scogin 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 76,500 pounds of raw material at a price of $8.70 per pound and used 71,880 pounds of the raw material to produce 19,400 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 Property, Plant, and Equipment (net). All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.When recording the raw materials used in production, the Work in Process inventory account will increase (decrease) by:
A) ($646,020) 
B) $646,020 
C) ($646,920) 
D) $646,920

Quizplus · Accepted Answer

To calculate the value of raw materials used in production, we need to multiply the amount of raw materials used (71,880 pounds) by the standard cost per pound ($8.10). This gives us a standard cost of $581,448. Since the actual cost of raw materials purchased was $665,550 (76,500 pounds x $8.70 per pound), there is a favorable variance of $84,102 (actual cost - standard cost). This favorable variance is closed directly to Cost of Goods Sold, which reduces the cost of goods sold by $84,102. Therefore, the entry made to record the raw materials used in production is:

Debit Work in Process for $581,448
Credit Raw Materials for $581,448

Since the entry shows an increase in the Work in Process inventory account, the answer is B.

Scogin Corporation Uses a Standard Cost System in Which Inventories