In a standard cost accounting system, the entry to record purchase of raw materi
ID: 2469046 • Letter: I
Question
In a standard cost accounting system, the entry to record purchase of raw materials on account for $13,500 when the standard cost Is $12,750 includes debit to Raw Materials Inventory for 12,750, debit to Materials Price Variance for $750 and credit to Accounts Payable for $13,500. debit to Materials Price Variance for S7S0 and credit to Accounts Payable for $750. debit to Raw Materials Inventory for $13,500 and credit to Accounts Payable of $13,500. debit to Raw Materials Inventory for $12,750 and credit to Accounts Payable of $12,750Explanation / Answer
Correct Answer:
Debit to raw material inventory for $12750, debit to material price variance $750 and credit to account payable for $13500.
Explanation:
Under standard costing system, inventory account gets debit on the basis of standard cost that is $12750. Further, the price variance is recorded as material price variance.
Thus, following entry takes place:
Dr Cr
Raw Material Inventory $12750
Material Price Variance $750
Accounts Payable $13500