Question

Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit of product. During July, the company purchased 40,000 pounds of direct materials for $210,000 and manufactured 12,000 finished units. The standard direct materials cost allowed for the units manufactured is $120,000. The performance report shows that Pricilla has an unfavorable direct materials usage variance of $5,000. Also, the company records any price variance for materials at time of purchase. The actual number of pounds (AQ) of direct materials used to produce July's output was: ___________

a. 20,000 pounds.
b. 25,000 pounds.
c. 12,000 pounds.
d. 40,000 pounds.
e. 24,000 pounds.

Answer 1

actual quantity= 25,000 pounds

Step-by-step explanation:

Giving the following information:

Standard quantity= 2 pounds per units

Production= 12,000 units

Direct material quantity variance= $5,000 unfavorable

Standard price= 120,000/(2*12,000)= $5

To calculate the actual quantity used in production, we need to use the following formula:

Direct material quantity variance= (standard quantity - actual quantity)*standard price

-5,000 = (24,000 - actual quantity)*5

-5,000 = 120,000 - 5actual quantity

125,000/5 = actual quantity

25,000 = actual quantity