ABC 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 (100 oz. @ $0.10)

$ 10.00

During the first month of operations the company experienced the following results:

A. Gallon units produced: 50,000

B. Ounces of materials purchased and used: 5,500,000 ounces at $0.09

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.