Cornerstones of Managerial Accounting 4th Edition by Maryanne Mowen, Don Hansen, Dan Heitger

Exercise 20

Materials Variances
Manzana Company produces apple juice sold in gallons. Recently, the company adopted the following material standard for one gallon of its apple juice:
During the first week of operation, the company experienced the following results:
a. Gallon units produced: 20,000.
b. Ounces of materials purchased and used: 2,650,000 ounces at $0.045.
c. No beginning or ending inventories of raw materials.
Required:
1. Compute the materials price variance.
2. Compute the materials usage variance.
3. During the second week, the materials usage variance was $4,000 unfavorable and the materials price variance was $20,000 unfavorable. The company purchased and used 2,000,000 ounces of material during this week. How many gallons of juice were produced and what was the actual price paid per ounce of materials