Question

During June, Cisco Company produced 12,000 chainsaw blades. The standard quantity of material allowed per unit was 1.5 pounds of steel per blade at a standard cost of $8 per pound. The actual cost was $7 per pound. The actual pounds of steel that Cisco purchased were 19,500 pounds. All materials purchased were used. Calculate Cisco's materials usage variance. a. $10,500 F b. $10,500 U c. $12,000 U d. $12,000 F

Answer 1

Answer:

Hence, Cisco's materials usage variance is  12,000 Unfavorable

So, the correct option is c. $12,000

Explanation:

Material Usage variance : The computation of material usage variance is shown below:

= (Standard Quantity - Actual Quantity ) × Standard price per pound

where,

Standard Quantity = Production units × Material allowed per unit

= 12,000 × 1.5

= 18,000 pounds

So,

Material Usage Variance = (18,000 - 19,500) × $8

                                         = 12,000 Unfavorable

Hence, Cisco's materials usage variance is  12,000 Unfavorable

So, the correct option is c. $12,000