Question

Calculating the Direct Materials Price Variance and the Direct Materials Usage Variance Guillermo's Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Guillermo has found that a typical oil change takes 22 minutes and 6.6 quarts of oil are used. In June, Guillermo's Oil and Lube had 900 oil changes. Guillermo's Oil and Lube Company provided the following information for the production of oil changes during the month of June: Actual number of oil changes performed: 900 Actual number of quarts of oil used: 5,440 quarts Actual price paid per quart of oil: $5.10 Standard price per quart of oil: $4.95 Required: 1. Calculate the direct materials price variance (MPV) and the direct materials usage variance (MUV) for June using the formula approach. If required, round your answers to the nearest cent. MPV $ - Select your answer -FavorableUnfavorableItem 2 MUV $ - Select your answer -FavorableUnfavorableItem 4 2. Calculate the total direct materials variance for oil for June. If required, round your answer to the nearest cent. $  - Select your answer -FavorableUnfavorableItem 6 3. What if the actual number of quarts of oil purchased in June had been 5,370 quarts, and the materials price variance was calculated at the time of purchase? If required, round your answers to the nearest cent. What would be the materials price variance (MPV)? $  - Select your answer -FavorableUnfavorableItem 8 What would be the materials usage variance (MUV)? $  - Select your answer -FavorableUnfavorableItem 10

Hide Feedback

Partially Correct

Answer 1

Guillermo has found that a typical oil change takes 22 minutes and 6.6 quarts of oil are used. In June, Guillermo's Oil and Lube had 900 oil changes.

Guillermo's Oil and Lube Company provided the following information for the production of oil changes during the month of June:

Actual number of oil changes performed: 900 (ACTUAL OPERATIONS)
Actual number of quarts of oil used: 5,440 quarts (AQ)
Actual price paid per quart of oil: $5.10 (AP)
Standard price per quart of oil: $4.95 (SP)

1.

SQ will be based on actual number of oil changes performed

6.6 quarts of oil needed for 1 oil change operation, then for 900 oil changes – how many quarts of oil required

900 x 6.6 =5940      (SQ= 5940 quarts)

MATERIAL PRICE VARIANCE = AQ( SP-AP)

MATERIAL PRICE VARIANCE = 5440( 4.95 -5.10) = - $ 816 (U)

MATERIAL USAGE VARIANCE = SP(SQ-AQ)

MATERIAL USAGE VARIANCE = 4.95(5940-5440) = $2475 (F)

2. TOTAL DIRECT MATERIAL VARIANCE = (SQXSP)-(AQXAP)

TOTAL DIRECT MATERIAL VARIANCE = (5940 X4.95)-(5440X5.10) = $1659 (F)

3. NOW IF ACTUAL QUANTITY IS 5370 QUARTS, THEN

MATERIAL PRICE VARIANCE = AQ( SP-AP)

MATERIAL PRICE VARIANCE = 5370( 4.95 -5.10) = - $ 805.5 (U)

MATERIAL USAGE VARIANCE = SP(SQ-AQ)

MATERIAL USAGE VARIANCE = 4.95(5940-5370) = $2821.5 (F)