Landlubber Company established a standard direct materials cost of 1.5 gallons at $2 per gallon for one unit of its product. During the past month, actual production was 6,500 units. The material quantity variance was $700 favorable and the material price variance was $470 unfavorable. The entry to charge Goods in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include:

Question

Quizplus · Accepted Answer

-To charge Goods in Process Inventory for the standard material costs during the month, we need to calculate the standard cost per unit.

Standard cost per unit = 1.5 gallons x $2/gallon = $3 per unit

Total standard material cost for 6,500 units = $3 x 6,500 = $19,500

So, we will debit Goods in Process Inventory for $19,500.

-To record the direct material variances in the accounts, we need to credit the unfavorable variance and debit the favorable variance.

We have a material quantity variance of $700 favorable, so we will credit Direct Material Quantity Variance for $700.

We also have a material price variance of $470 unfavorable, so we will debit Direct Material Price Variance for $470.

Therefore, all of the given choices are correct.

Landlubber Company Established a Standard Direct Materials Cost of 1