John Clarke, production manager, has just received a report stating that the total materials variance for last month was $\$ 3,000$ unfavorable. However, he is not certain whether the production foremen are overdrawing from inventory or the purchasing department has been unable to acquire materials at reasonable prices. The information he needs is contained in the following report:

1. Compute the materials price and quantity variances for the month.
2. Interpretive Question: What was the cause of the unfavorable variance, and what recommendation would you make to Mr. Clarke?

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Standard production Actual production... Standard materials per unit Materials used in March... Standard price for materials.. Actual price for materials. 150,000 units 146,000 units 2 pounds 300,000 pounds $1.50 per pound $1.47 per pound