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

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Business

Olson

5 June, 01:13

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

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Francesca Roth · Answer 1

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