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17 October, 19:29

Marciano Manufacturing uses a standard cost system. Standards for direct materials are as follows: Direct materials (pounds per unit of output) 3 Cost per pound of direct materials $ 6 The company plans to produce 2 comma 000 units and has purchased on account 12 comma 000 pounds of direct materials at a net cost of $ 43 comma 800. What is the journal entry to record this transaction?

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  1. 17 October, 19:43
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    Debit Raw Materials Inventory with $72,000; Credit Direct materials Cost Variance with 28,200, and Credit Accounts Payable with $43,800.

    Explanation:

    Direct materials purchase on account = $43,800

    Standard cost of direct materials = 12,000 * $6 = $72,000

    Direct materials cost variance = $72,000 - $43,800 = $28,200

    The journal entries will therefore be as follows:

    Details Dr ($) Cr ($)

    Raw Materials Inventory 72,000

    Direct materials Cost Variance 28,200

    Accounts Payable 43,800

    To record direct materials cost and variance.
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