ExpertCPA · Question 05 · Area I: Business Analysis
During the current month, a company purchased 20,000 pounds of raw material for $42,000. The standard price for the material is $2.00 per pound. The company used 18,000 pounds in production, while the standard quantity allowed for the actual output was 17,500 pounds.<br/><br/>What is the Direct Materials Purchase Price Variance and the Direct Materials Usage Variance?
During the current month, a company purchased 20,000 pounds of raw material for $42,000. The standard price for the material is $2.00 per pound. The company used 18,000 pounds in production, while the standard quantity allowed for the actual output was 17,500 pounds.<br/><br/>What is the Direct Materials Purchase Price Variance and the Direct Materials Usage Variance?
Answer options:
Price Variance: $2,000 Unfavorable; Usage Variance: $1,000 Unfavorable
Price Variance: $2,000 Unfavorable; Usage Variance: $1,000 Favorable
Price Variance: $1,800 Unfavorable; Usage Variance: $1,000 Unfavorable
Price Variance: $2,000 Unfavorable; Usage Variance: $1,000 Unfavorable
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