Precilla Company uses a standard costing system that allows 2.0 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 Precilla has an unfavorable direct materials usage variance of $5,000. Also, the company records any price variance for materials at time of purchase.

Precilla's standard price per pound of direct materials (SP), to two decimal places, is:
A) $4.00.
B) $5.00.
C) $6.00.
D) $10.00.
E) $12.00.

Question

Precilla Company uses a standard costing system that allows 2.0 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 Precilla has an unfavorable direct materials usage variance of $5,000. Also, the company records any price variance for materials at time of purchase.

Precilla's standard price per pound of direct materials (SP) , to two decimal places, is:

Precilla's standard price per pound of direct materials (SP), to two decimal places, is:
A) $4.00.
B) $5.00.
C) $6.00.
D) $10.00.
E) $12.00.

Quizplus · Accepted Answer

The standard cost allowed for the units manufactured is $120,000 for 24,000 pounds (12,000 units x 2 pounds/unit). Therefore, the standard price per pound is $120,000 / 24,000 pounds = $5.00.

Precilla Company Uses a Standard Costing System That Allows 2