Problem:
Error Correction, Inc. (ECI) makes a white liquid substance that is used to cover errors made on printed documents. ECI expects to use 4 ounces of a chemical known as Fatal per bottle of correction fluid. Fatal is expected to cost $.40 per ounce. Actual materials cost amounted to $.46 per ounce. ECI expected to make and sell 1,000,000 bottles of correction fluid during the accounting period. Actual production amounted to 900,000 bottles and 4,095,000 ounces.
Q1. Materials price variance for Fatal is:
a. $245,700 unfavorable
b. $245,700 favorable
c. $40,000 favorable
d. $40,000 unfavorable
Q2. Materials usage variance for Fatal is:
a. $198,000 favorable
b. $198,000 unfavorable
c. $245,700 favorable
d. $245,700 unfavorable