Question - PURE Inc. produces flavored waters, sold in gallons. Recently the company adopted the following materials standard for one gallon of its raspberry flavored water:
Direct materials (90 oz. @ $0.08) $ 7.20
During the first month of operations the company experienced the following results:
A. Gallon units produced: 80,000
B. Ounces of materials purchased and used: 7,320,000 ounces at $0.07
C. No beginning or ending inventories of raw materials
Required:
1. Compute the materials price variance indicating if it is favorable or unfavorable.
2. Compute the materials usage variance indicating if it is favorable or unfavorable.