Question

Seafarer 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 Work in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include all of the following except:

A) A debit to Work in Process for $19,500.
B) A credit to Raw Materials for $19,270.
C) A debit to Direct Material Price Variance for $470.
D) A credit to Direct Material Quantity Variance for $700.
E) A debit to Cost of Goods Sold for $230.

Answer 1

E) A debit to Cost of Goods Sold for $230.

Step-by-step explanation:

The entry to charge Work in Process Inventory for the standard material costs during the month and to record the direct material variances in the accounts would include a,b,c and d.

Work In Process $19,500Dr

Material price variance was $470 unfavorable Dr

Raw Materials $19,270 Cr

Material quantity variance was $700 favorable Cr

Only option E will be left out

There is no use of the Cost of Goods Sold account in the price and quantity variances for material as it is charged to production.