Question

TLA Inc. makes a unit called EV. EV has a standard of 3 yards of fabric for each EV. There is no beginning inventory of fabric. The standard price per yard of fabric is $2. During the period, TLA made 8,000 EVs. TLA purchased and used 16,800 yards of fabric and incurred an actual cost of $48,500 for the fabric.
If TLA uses a standard cost system the journal entry to record the materials purchase should include a ______ to Materials Control in the amount of ______.

		credit, $48,500
		credit, $33,600
		debit, $48,500
		debit, $33,600

Answer 1

Actual cost of materials = $48,500

Standard cost of actual materials used = 16,800 yards*$2 = $33,600

Material control account will be debited by $33,600, Accounts Payable will be credited by $48,500 and balance will be debited to Materials Price Variance (i.e. $48,500 - $33,600 = $14,900).

Therefore the journal entry to record the materials purchase should include a debit to Materials Control in the amount of $33,600.

Hence the correct option is d).debit, $33,600.