Precilla Company Uses a Standard Costing System That Allows 2

question 81

Multiple Choice

Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit.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 number of pounds of direct materials used to produce July's output was:

• A)12,000 pounds.
• B)20,000 pounds.
• C)24,000 pounds.
• D)25,000 pounds.
• E)40,000 pounds.

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Definitions:

Owner's Equity

The value that accrues to the owners of a company after settling all its debts, equivalent to the assets minus the liabilities.

Residual Equity

Residual Equity represents the amount of equity that remains for the common shareholders after all liabilities and preferential stock claims have been settled.

Assets

Assets are possessions of an individual or a business that hold value and can yield benefits in the future.

Liabilities

Financial obligations or debts that a company owes to outside parties, which must be paid back in the future.