Debits to Raw Materials

Managerial: number of units, raw material purchase, selling price, direct labor rate

Sarter Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.

Beginning Inventory Ending Inventory
Finished goods (units) 70,000 20,000
Raw material (grams) 50,000 60,000

Each unit of finished goods requires 3 grams of raw material.

11. If the company plans to sell 880,000 units during the year, the number of units it would have to manufacture during the year would be:
A) 900,000 units
B) 930,000 units
C) 880,000 units
D) 830,000 units
E) None of the above

12. How much of the raw material should the company purchase during the year?
A) 2,550,000 grams
B) 2,490,000 grams
C) 2,480,000 grams

15. Anderson Company purchased 20,000 pounds of direct material at $0.70 per pound. The standard cost per pound of material is $0.60 per pound. The general ledger entry to record the issuance of materials would include:
A) a debit to Materials Price Variance $2,000.
B) a credit to Materials Price Variance of $2,000.
C) a credit to Raw Materials of $0.70 per pound times the number of pounds issued.
D) a credit to Raw Materials of $0.60 per pound times the number of pounds issued.
E) None of the above

17. Milford Corporation has in stock 16,100 kilograms of material R that it bought five years ago for $5.75 per kilogram. This raw material was purchased to use in a product line that has been discontinued. Material R can be sold as is for scrap for $3.91 per kilogram. An alternative would be to use material R in one of the company's current products, S88Y, which currently requires 2 kilograms of a raw material that is available for $7.60 per kilogram. Material R can be modified at a cost of $0.77 per kilogram so that it can be used as a substitute for this material in the production of product S88Y. However, after modification, 4 kilograms of material R is required for every unit of product S88Y that is produced. Milford Corporation has now received a request from a company that could use material R in its production process. Assuming that Milford Corporation could use all of its stock of material R to make product S88Y or the company could sell all of its stock of the material at the current scrap price of $3.91 per kilogram, what is the minimum acceptable selling price of material R to the company that could use material R in its own production process?
A) $0.88
B) $3.03
C) $4.57
D) $3.91
E) None of the above

20. Results of operations for the Anderson Company indicated that the actual direct labor rate for the month of May was $9.75 while the standard rate was $10.00. The general ledger entry to record the incurrence of direct labor cost would include:
A) a debit to Work-In-Process for the actual number of hours times $9.75 per hour.
B) a debit to Work-In-Process for the standard number of hours times $10.00 per hour.
C) a debit to Work-In-Process for the standard number of hours times $9.75 per hour.
D) a debit to Work-In-Process for the actual number of hours times $10.00 per hour.
E) None of the above

24. Coblentz Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable manufacturing overhead is $6.20 per MH. The company had budgeted its fixed manufacturing overhead cost at $40,000 for the month. During the month, the actual total variable manufacturing overhead was $48,970 and the actual total fixed manufacturing overhead was $43,000. The actual level of activity for the period was 8,300 MHs. What was the total of the variable overhead spending for the month?
A) $2,490 favorable
B) $510 favorable
C) $530 unfavorable
D) $2,490 unfavorable
E) None of the above

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