Direct material variances Universal Company manufactures cast housings for a variety of uses. The castings are made by mixing several ingredients which are then solidified in molds. The mix of ingredients depends on the properties each casting requires. There is some freedom to substitute a higher-cost material for one that costs less without impairing the quality of the casting. However, substituting low-cost materials for high-cost is generally not possible.

Two of the company's castings have the following material quantity standards:

Material A was used for production of Type BC castings because it was brought to the mixing site for Type BC castings by mistake.

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Casting Material A Material B Material C 8 units 4 units Type BC 5 units 2 units Standard prices of materials are: A, $3 per unit; B, $2.80 per unit; and C, $1.00 per unit. Following are data on March purchases of materials and production of 1,000 units of Type AB castings and 2,000 units of Type BC castings: Materials A B C Units Cost 25,000 $74,000 10,000 30,000 40,000 38,800 Product A B C Type AB 7,000 4,500 Type BC 3,000 8,000 4,100