Bohon Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product contains the following information concerning direct materials:
During the year, the company completed the following transactions concerning direct materials:
a. Purchased 19,700 pounds of raw material at a price of $4.70 per pound.
b. Used 18,500 pounds of the raw material to produce 18,400 units of work in process.
The company calculated the following direct materials variances for the year:
Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation.

-When the raw materials used in production are recorded in transaction (b)above,which of the following entries will be made?
A) ($550) in the Materials Price Variance column
B) ($550) in the Materials Quantity Variance column
C) $550 in the Materials Price Variance column
D) $550 in the Materials Quantity Variance column

Question

Bohon Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs. There is no variable manufacturing overhead. The standard cost card for the company's only product contains the following information concerning direct materials:
  During the year, the company completed the following transactions concerning direct materials:
a. Purchased 19,700 pounds of raw material at a price of $4.70 per pound.
b. Used 18,500 pounds of the raw material to produce 18,400 units of work in process.
The company calculated the following direct materials variances for the year:
  Assume that all transactions are recorded on the below worksheet, which is similar to the worksheet shown in your text except that it has been divided into two parts so that it fits on one page. The beginning balances in each of the accounts have been given. PP&E (net) stands for Property, Plant, and Equipment net of depreciation.
  
-When the raw materials used in production are recorded in transaction (b)above,which of the following entries will be made?
A) ($550) in the Materials Price Variance column 
B) ($550) in the Materials Quantity Variance column 
C) $550 in the Materials Price Variance column 
D) $550 in the Materials Quantity Variance column

Quizplus · Accepted Answer

The materials price variance is recorded when materials are purchased; the materials quantity variance is recorded when raw materials are used.
Favorable variances are entered in the worksheet as positive entries and unfavorable variances as negative entries.

Bohon Corporation Manufactures One Product