Pericloud Company uses a standard costing system. The following information pertains to direct materials for July: Standard price per lb. $20.00 Actual purchase price per lb. $18.00 Quantity purchased 2,000 lbs. Quantity used 1,400 lbs. Standard quantity allowed for actual output 1,450 lbs. Actual output 500 units Pericloud Company reports its materials price variances at the time of purchase. What is the materials usage variance for Pericloud Company? a.$7,850 U b.$1,000 F c.$1,900 U d.$2,450 F

Question

Tania Cantrell

Business

31 January, 16:27

Pericloud Company uses a standard costing system. The following information pertains to direct materials for July: Standard price per lb. $20.00 Actual purchase price per lb. $18.00 Quantity purchased 2,000 lbs. Quantity used 1,400 lbs. Standard quantity allowed for actual output 1,450 lbs. Actual output 500 units Pericloud Company reports its materials price variances at the time of purchase. What is the materials usage variance for Pericloud Company? a.$7,850 U b.$1,000 F c.$1,900 U d.$2,450 F

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Answers (1)

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Danielle Bird · Answer 1

b) $1000 (F)

Explanation:

We are given:

•Standard price SP = $20

•Actual price AP = $18.00

•Quantity purchased QP = 2000lbs

• Quantity used = 1400 lbs

• Std qty for actual output = 1450lbs

•Actual output = 500 units

To find the materials usage variance for Pericloud Company we use the formula:

Standard price * (actual quantity of materials used - standard quantity allowed)

SP * (AQ - SQ)

From the report, we have

SP = $20

AQ = 1400lbs

SQ = 1450lbs

Therefore, we now have:

$20 * (1400lbs - 1450lbs)

= $1000