Problem: Standard Costing & Variances
Jake's Cheese Company produces gourmet cheese for resale at local grocery stores. Jake's expected to use 3.0 pounds of direct materials to produce one unit (batch) of product at a cost of $8 per pound. Actual results are in for last year, which indicates 45,000 batches of cheese were sold. The company purchased 160,000 pounds of materials at $7.50 per pound, and used 145,000 pounds in production.
A. Calculate the materials price variance.
B. Calculate the materials quantity variance.
C. Suggest several possible reasons for the materials price and quantity variances calculated in (A) and (B)