Question

Check my work Exercise 16-49 (Static) Comprehensive Cost Variance Analysis (LO 16-5, 6) NSF Lube is a fast-growing chain of oil change stores. The following data are available for last year's services. • NSF Lube performed 475,200 oil changes last year. It had budgeted 432,000 oil changes, averaging 10 minutes each - Standard variable labor and support costs per oil change were as follows. Direct oil specialist services: le minutes at $24 per hour Variable support staff and overhead: 7.5 minutes at $16 per hour $4 . Fixed overhead costs: Annual budget $1,036.000 • Foed overhead is applied at the rate of $2.40 per ol change. • Actual oil change costs Direct oil specialist services: 475,200 changes averaging 12 minutes at $26.00 per hour $2,471,040 < Prev 22 of 23 !! Next > were to search 9:30 PM

Answer 1

a.	Oil specialist:
	Price variance=Actual hours used*(Standard rate -Actual rate )
	If the answer is positive, variance is favorable.Otherwise unfavorable.
	Actual hours used=Total changes*Average minutes=(475200*12)/60=95040 hours
	Standard rate=$ 24 per hour
	Actual rate=$ 26 per hour
	Price variance=95040*(24-26)=-190080=$ 190080 (Unfavorable)
	Efficiency variance=Standard rate *(Standard hours -Actual hours used)
	If the answer is positive, variance is favorable.Otherwise unfavorable.
	Standard rate=$ 24 per hour
	Standard hours=Actual changes*standard average minutes per change=(475200*10)/60=79200 hours
	Actual hours used=Total changes*Average minutes=(475200*12)/60=95040 hours
	Efficiency variance=24*(79200-95040)=-380160=$ 380160 (Unfavorable)
	Total variance=Price variance+Efficiency variance=-190080+-380160=-570240=$ 570240 (Unfavorable)
	Variable overhead:
	Price variance=Actual hours used*(Standard rate -Actual rate )
	If the answer is positive, variance is favorable.Otherwise unfavorable.
	Actual hours used=Total changes*Average minutes=475200*0.14=66528 hours
	Standard rate=$ 16 per hour
	Actual rate=$ 15 per hour
	Price variance=66528*(16-15)=66528=$ 66528 (Favorable)
	Efficiency variance=Standard rate *(Standard hours -Actual hours used)
	If the answer is positive, variance is favorable.Otherwise unfavorable.
	Standard rate=$ 16 per hour
	Standard hours=Actual changes*standard average minutes per change=(475200*7.5)/60=59400 hours
	Actual hours used=Total changes*Average minutes=475200*0.14=66528 hours
	Efficiency variance=16*(59400-66528)=-114048=$ 114048 (Unfavorable)
	Total variance=Price variance+Efficiency variance=66528+-114048=-47520=$ 47520 (Unfavorable)
b.	Fixed overhead:
	Price variance=Budgeted fixed overhead-Actual fixed overhead
	If the answer is positive, variance is favorable.Otherwise unfavorable.
	Budgeted fixed overhead=Budgeted activity level*Fixed overhead rate=432000*2.40=$ 1036800
	Actual fixed overhead=$ 1200000
	Price variance=1036800-1200000=-163200=$ 163200 (Unfavorable)
	Production volume variance=Budgeted fixed overhead-Applied fixed overhead
	If the answer is positive, variance is favorable.Otherwise unfavorable.
	Budgeted fixed overhead=Budgeted activity level*Fixed overhead rate=432000*2.40=$ 1036800
	Applied fixed overhead=Actual oil changes*Standard fixed overhead rate per oil change=475200*2.40=$ 1140480
	Production volume variance=1036800-1140480=-103680=$ 103680 (Unfavorable)
	Fixed overhead cost variance=Price variance+Production volume variance=-163200+-103680=-266880=$ 266880 (Unfavorable)