CIMAPRA17-BA2-1 Exam - Topic 1 Question 24 Discussion

Question

A company operates an integrated standard cost accounting system. The standard price of raw material A is $20 per litre. At the start of period 1, the inventory of 500 litres of raw material A was valued at $20 per litre. During period 1, 100 litres of raw material A were purchased at an actual price of $21 per litre. During period 2, 550 litres of raw material A were issued to Job 789.

In respect of the above events, which TWO of the following statements are correct? (Choose two.)

Lashaunda · Accepted Answer

D) An adverse material price variance should be recorded in the statement of profit or loss for period 2. and E) The first 500 litres of raw material A issued should be debited to the Job 789 account at $20 per litre, and the remaining 50 litres at $21 per litre.

Lashaunda · Answer

A) The raw material inventory at the end of period 1 should include 100 litres valued at $21 per litre.

Lashaunda · Answer

B) An adverse material price variance should be recorded in the statement of profit or loss for period 1.

Lashaunda · Answer

C) The raw material inventory at the end of period 2 should be valued at $20 per litre.