Question

Titus Company purchased on account and used 650 pounds of tomatoes (direct materials) to produce a taco sauce with a 635 pound standard direct materials requirement. The standard materials price is $22.40 per pound. The actual price of the tomatoes was $22.20 per pound. Titus records standards and variances in the general ledger.

1. Prepare the journal entry to record the purchase of the tomatoes on account. If an amount box does not require an entry, leave it blank.

2. Prepare the journal entry to record the tomatoes entering production. If an amount box does not require an entry, leave it blank.

Answer 1

• All working forms part of the answer
• Workings

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                     22.40	-	$                    22.20	)	x	650
	130
	Variance		$                  130.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	635	-	650	)	x	$                        22.40
	-336
	Variance		$                  336.00			Unfavourable-U

• Requirement 1

Accounts Titles	Debit	Credit
Raw material Inventory	$                                                  14,560.00
Material Price variance [calculated above]		$              130.00
Accounts payable [650 pounds x $ 22.20]		$        14,430.00

• Requiremnet 2

Work In Process Inventory [635 pounds x $ 22.4]	$                                                  14,224.00
Material Quantity variance [calculated above]	$                                                        336.00
Raw material Inventory		$        14,560.00