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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307

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BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307
Textbook Problem

Standard cost journal entries

Lo-bed Company produced 4,000 units that require two standard gallons per unit at $20.00 standard price per gallon. The company actually used 8,200 gallons in production. Journalize the entry to record the standard direct materials used in production.

To determine

Standard cost:

In the accounting records, the term standard cost refers to the practice of replacement of an expected cost for an actual cost. Then the difference between the expected costs, and actual costs showing the variance are also recorded periodically. A standard costs is also known as target cost or predetermined cost.

To journalize: The entry to record the standard direct materials used in production.

Explanation

Journalize the entry to record the standard direct materials used in production.

Date Accounts and Explanation

Debit

($)

Credit

($)

  Work in process (8,000gal (1)×$20.00) 160,000  
      Direct materials quantity variance (2) 4,000  
      Materials    (3)    164,000
  (Received cash dividend)    

Table (1)

Working notes:

Standard quantity = No of units required ×Standard gal. per unit= 4,000 units × 2=8,000gal

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