Cave Company produces a product called Lem. The standard direct material cost to produce one unit of Lem is 4 quarts of raw material at $2.50 per quart. During May 2010, 4,200 quarts of raw material were purchased at a cost of $10,080. All the purchased material was used to produce 1,000 units of Lem.
a. Compute the actual cost per quart and the material price variance for May 2010.
b. Assume the same facts except that Cave Company purchased 5,000 quarts of material at the previously calculated cost per quart, but used only 4,200 quarts. Compute the material price variance and material usage variance for May 2010, assuming that Cave identifies variances at the earliest possible time.
c. Which managers at Cave Company would most likely assume responsibility for control of the variance computed in requirement (b)?