The cost accountant for blue pharmaceuticals has informed youthat the company's materials quantity variance for the drugallegro was exactly equal to its materials price variance for theyear. The company's normal level of production is 50 batchesof Allegro per year. However, due to uncertainties regarding foundation funding, it produced only 25 batches during the currentyear. Other cost information regarding allegro's directmaterials is as follows:
Standard price par gram ofmaterial...............................................................$60
Actual kilograms purchased and used during theyear..................................100kg
Actual cost of materials purchased during theperiod...............................$6,000,000
Number of grams perkilogram...............................................................1,000grams
a. Compute blue's materials price variance.
b. Compute the standard quantity of materials allowed per batch of allegro produced.
c. Why would you not expectblue to have a large materials quantity variance?