Precilla Company Uses a Standard Costing System That Allows 2

question 109

Multiple Choice

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.

The direct materials purchase-price variance in July (to the nearest dollar) was:

• A) $10,000 unfavorable.
• B) $50,000 unfavorable.
• C) $80,000 unfavorable.
• D) $86,000 unfavorable.
• E) $90,000 unfavorable.

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