An illustration of journal entries using standard costs In standard costing, we want to get work-in-progress (WIP) costs at standard so each lot or batch of product has the same standard cost. When purchasing materials, we must pay the AP for the AG purchased, but we debit materials at the BP for the AQ purchased. At the purchase date, we know the BP. The difference between debit and credit BP − AQ)(AQ purchased )] is the materials purchase value (PV). By the time the materials are used, we know the BQIA for actual outputs. Hence, we debit WIP for BP × BQIA. Materials Control is credited for BQ × AQ used (we put materials into the account at AQ, so we must take them out at AQ). The difference between the debit and credit BP × (BQIA − AQ used )] is the materials EV. From WIP to EG to CGS, all costs remain at standard.
