Raw Materials Accounting Problem?

Question

When the actual prce paid on credit for a raw material exceeds its standard price, the journal entry would include:

1. Dr. Raw Materials
Cr. Materials Price Variance
2. Dr. Accounts Payabe
Cr. Materials Price Variance
3. Dr. Raw Materials
Dr. Materials Price Variance
4. Dr. Accounts Payable
Dr. Materials Price Variance

Answer 1

When the actual prce paid on credit for a raw material exceeds its standard price, the journal entry would include:

3. Dr. Raw Materials
Dr. Materials Price Variance

For e.g. purchases at std price = $63,000 but actual purchases = $66,000, your journal entries:
Dr Raw materials inventory 63,000
Dr Materials price variance 3,000
Cr A/cs payable 66,000