Fulton Fruit Basket Company makes baskets of assorted fruit. The standard and actual costs of oranges used in each basket of fruit follow:
____________________________________________________ Standard _____Actual
Average number of oranges per basket ................................. 5.00 ......... 4.75
Price per orange ........................................................... × $0.20 ......× $0.24
Cost of oranges per basket ............................................... $1.00 .........$1.14
Fulton actually produced 25,000 baskets.
Required
a. Determine the materials price variance and indicate whether it is favorable (F) or unfavorable (U).
b. Determine the materials usage variance and indicate whether it is favorable (F) or unfavorable (U).
c. Explain why the purchasing agent may have been responsible for the usage variance