In: Accounting
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 30 minutes and 6.4 quarts of oil are used. In June, Guillermo's Oil and Lube had 920 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: 920
Actual number of quarts of oil used: 6,600 quarts
Actual price paid per quart of oil: $5.10
Standard price per quart of oil: $5.05
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 $__________ Unfavorable
MUV $__________ Unfavorable
2. Calculate the total direct materials variance for oil for June. If required, round your answer to the nearest cent.
$__________ Favorable
3. What if the actual number of quarts of oil purchased in June had been 6530 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)?
$ ___________Unfavorable
What would be the materials usage variance (MUV)?
$ ___________Unfavorable
Actual DATA for |
920 |
Oil changes |
|
Quantity (AQ) |
Rate (AR) |
Actual Cost |
|
Direct Material |
6600 quarts |
$ 5.10 |
$ 33,660.00 |
Standard DATA for |
920 |
Oil changes |
|
Quantity (SQ) |
Rate (SR) |
Standard Cost |
|
Direct Material |
5888 quarts [920 x 6.4] |
$ 5.05 |
$ 29,734.40 |
Material Price Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Quantity |
( |
$ 5.05 |
- |
$ 5.10 |
) |
x |
6600 |
-330 |
||||||
Variance |
330 |
Unfavourable-U |
||||
Material Quantity Variance |
||||||
( |
Standard Quantity |
- |
Actual Quantity |
) |
x |
Standard Rate |
( |
5888 |
- |
6600 |
) |
x |
$ 5.05 |
-3595.6 |
||||||
Variance |
3595.6 |
Unfavourable-U |
||||
Material Spending Variance – ANSWER 2 |
||||||
( |
Standard Cost |
- |
Actual Cost |
) |
||
( |
$ 29,734.40 |
- |
$ 33,660.00 |
) |
||
-3925.6 |
||||||
Variance |
3925.6 |
Unfavourable-U |
Working
Actual DATA for |
920 |
Oil changes |
|
Quantity (AQ) |
Rate (AR) |
Actual Cost |
|
Direct Material purchased |
6530 quarts |
$ 5.10 |
$ 33,303.00 |
Standard DATA for |
920 |
Oil change |
|
Quantity (SQ) |
Rate (SR) |
Standard Cost |
|
Direct Material |
5888 quarts |
$ 5.05 |
$ 29,734.40 |
Material Price Variance |
||||||
( |
Standard Rate |
- |
Actual Rate |
) |
x |
Actual Quantity |
( |
$ 5.05 |
- |
$ 5.10 |
) |
x |
6530 |
-326.5 |
||||||
Variance |
326.5 |
Unfavourable-U |
||||
Material Quantity Variance (USAGE) |
||||||
( |
Standard Quantity |
- |
Actual Quantity |
) |
x |
Standard Rate |
( |
5888 |
- |
6530 |
) |
x |
$ 5.05 |
-3242.1 |
||||||
Variance |
3242.1 |
Unfavourable-U |