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 29 minutes and 6.2 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: 5,400 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$ _________________  _________________ MUV$ _________________  _________________ 2. Calculate the total direct materials variance for oil for June. If required, round your answer to the nearest cent.

$ _________________  _________________

3. What if the actual number of quarts of oil purchased in June had been 5,330 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)?

$ _________________  _________________

What would be the materials usage variance (MUV)?

$ _________________  _________________

eBookCornerstone Exercise 9.3

Calculating the Direct Labor Rate Variance and the Direct Labor Efficiency 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 24 minutes and 6.2 quarts of oil are used. In June, Guillermo's Oil and Lube had 980 oil changes.

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

Required:

1. Calculate the direct labor rate variance (LRV) and the direct labor efficiency variance (LEV) for June using the formula approach.

LRV$ _________________  _________________ LEV$ _________________  _________________ 2. Calculate the total direct labor variance for oil changes for June.

$ _________________  _________________

3. What if the actual wage rate paid in June was $12.40? What impact would that have had on the direct labor rate variance (LRV)? On the direct labor efficiency variance (LEV)? Indicate what the new variances would be below. If required, round your answers to the nearest cent.

Direct labor rate variance (LRV):

$ _________________  _________________

Direct labor efficiency variance (LEV):

$ _________________  _________________

Answer 1

	Standard Quarts of Oil	SQ	Standard Quarts*Actual Oil
			=6.2*900
		SQ	=5580
	Material Price Variance	Material Usage Variance	Total Direct Material Variance
	MPV	MUV
Formula	(AP-SP)*AQ	(AQ-SQ)*SP	(AP*AQ)*(SP*SQ)
			MPV+MUV
Working	(5.10-5.05)*5400	(5400-5580)*5.05	270-909
Final	=270	=-909	=-639
If Actual Quantity is 5330, calculation at the time of purchase
	Material Price Variance	(AP-SP)*AQ
		(5.10-5.05)*5330
		=266.5
	No Impact on Material Usage Variance as purchased is not used.

Exercise 9.3 is incomplete as Actual and Standard Rate of Labor not given.