Sarbanes Corporation produces supplies for the mining industry. Below is the sales budget in units for 2022:

Q1

Budgeted Sales 8,000

The company is planning to increase the number of sales units by 15% each quarter in the year. The company desires to have an ending finished goods inventory of 30% of the next quarter's budgeted sales units. To produce each unit it costs the company $8 per pound of material, and they need 4 pounds of material per unit. At the end of each quarter, the company desires to have 20 percent of the following months production requirements on hand.

The company plans to produce 11,056 units in Quarter 3.

Required (10 marks: show all steps):

A) The CEO of the company wants to know how much the company should budget to spend on Direct Materials for both Q1 & Q2. Prepare the necessary calculations to answer this question.

B) In Q2 the company actually produced 11,000 units and spent $350,000 on direct materials. The CEO is wondering what the flexible variance would be for direct materials for Q2. Based on the variance you calculated what are some possible reasons for why the variance was favorable or unfavorable?