Given the following account balances at the end of the first year of operations: Direct materials inventory $ 60,000
Work in process inventory 120,000
Finished goods inventory 180,000
Cost of goods sold 600,000
Direct material price variance 65,000 U
Direct material efficiency 195,000 F
Assuming that variances are considered material, the entry and amount of the direct material price variance allocated to Cost of Goods Sold is:
A)Debit $40,625
B)Debit $41,082
C)Credit $43,333
D)Debit $39,935

Question

Quizplus · Accepted Answer

The direct material price variance is allocated based on the proportion of Cost of Goods Sold to the total of Cost of Goods Sold, Work in Process, and Finished Goods. The allocation to Cost of Goods Sold is: $65,000 U * ($600,000 / ($600,000 + $120,000 + $180,000)) = $40,625.

Given the Following Account Balances at the End of the First