The cost accountant for a drug company has informed you that the company's materials quality variance for a Allegra was exactly equal to its materials price variance for the year. The company's normal level of prodcution is 50 batches of Allegra per year. However due to uncertanties regarding foundation funding, it produced only 25 batches during the currnet year. Other cost information regarding Allegra's direct materials are as follows:
Standard price per gram of material..........................................$60
Actual kilograms purchased & used drungthe year................100 kg
Actual cost of materials purchased duringthe year..................$6,000,000
Number of grams perkilogram.................................................. 1,00grams
a. Compute the compnay's material price variance
b. Compute the standard quality of materials allowed per batch of Allegra produced.
c. Why would you not expect the company to have a large quantity variance