Jakes Cheese Company produces gourmet cheese for resale at local grocery stores. Jakes expected to use 3.0 pounds of direct materials to produce one unit (batch) of product at a cost of $8 per pound. Actual results are in for last year, which indicates 45,000 batches of cheese were sold. The company purchased 160,000 pounds of materials at $7.50 per pound, and used 145,000 pounds in production.

Required: (1) Calculate the materials price variance.

(2) Calculate the materials quantity variance.

(3) Suggest several possible reasons for the materials price and quantity variances calculated in requirements (1) and (2).

1. Use your plan of action to solve each problem, clearly outlining the procedures used, providing a concise explanation of each step, labeling relevant formulas, and showing worked out calculations and complete solutions. You may use an Excel spreadsheet or a calculator to help you perform the necessary calculations, but all corresponding work must be shown completely.

2. Answer all questions posed in the problem; if applicable, analyze and evaluate your results and provide a contextual explanation of the solutions you obtained.

3. Review your calculations and solutions and make sure that an external viewer would be able to follow your methodology and make sense of your calculations and corresponding explanations. Make certain that you have completed all steps of each problem.