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 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: Actual number of oil changes performed: 980 Actual number of quarts of oil used: 6,020 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 6,100 quarts, and the materials price variance was calculated at the time of purchase

Answer 1

Answer:

Material Price Variance=  $301 Unfavorable

Material Quantity Variance=  $283 Favorable

Total direct materials variance for oil for June $ 18 Unfavorable

Material Price Variance=  $305 Unfavorable at the time of purchase

Explanation:

Guillermo's Oil and Lube Company

Actual number of oil changes performed: 980

Actual number of quarts of oil used: 6,020 quarts

Actual price paid per quart of oil: $5.10

Standard price per quart of oil: $5.05

Material Price Variance= (Actual Price * Actual Quantity)- (Standard Price * Actual Quantity)

Material Price Variance= ($5.10 *6,020)-($5.05 *6,020)= $ 30702- $ 30401

Material Price Variance= $301 Unfavorable

Material Quantity Variance= (Standard Price * Actual Quantity)-(Standard Price * Standard Quantity)

Material Quantity Variance=($5.05 *6,020)-($5.05 *6.2 * 980)=($5.05 *6,020)-($5.05 *6076)

Material Quantity Variance=$ 30401-30683.8= 282.8

Material Quantity Variance=  $283 Favorable

Total direct materials variance for oil for June=$301 Unfavorable- $283 Favorable= $ 18 Unfavorable

3. Material Price Variance= (Actual Price * Actual Quantity)- (Standard Price * Actual Quantity)

Material Price Variance= ($5.10 *6,100)-($5.05 *6,100)= $ 31110- $ 30805

Material Price Variance=  $305 Unfavorable

Answer 2

The total Direct materials variance for oil for June is $18, an Unfavourable outcome. Material Price Variance is $305, which gives an unfavourable outcome at the time of purchase of 6,100 quarts for June.

What is Material Variance?

This is the difference between the actual costs incurred for the direct materials and the expected (or normal) costs of those items. It is useful for determining a business's ability to determine the cost of assets close to its target.

Calculation of Materials Price Variance:

$1.\rm\,Material \,Price\, Variance = Actual \,Price \times\, Actual \,Quantity)- (Standard\, Price\, \times \,Actual \, Quantity)\\\\\rm\,Material\, Price \,Variance= (\ 5.10 \times 6,020)-(\ 5.05 \times6,020)\\\\\rm\,Material\, Price \,Variance= \ 30702- \ 30401\\\\\rm\,Material \, Price \, Variance = \ 301 \rm\, Unfavourable$

Calculating Material Quantity Variance:

$2.\rm\,Material \, Quantity \, Variance= (Standard\, Price \times Actual \, Quantity)-(Standard\, Price \times Standard \, Quantity)\\\\Material \,Quantity \,Variance = (\ 5.05 \times 6,020) - (\ 5.05 \times 6.2 \times 980) = (\ 5.05 \times 6,020) - (\ 5.05 \times 6076)\\\\Material\, Quantity\, Variance =\ 30401- \ 30683.8 = \ 282.8\\\\Material \, Quantity \, Variance =\ 283,\,favourable$

$\rm\,Total \, direct \, materials \, variance = \ 301 (Unfavourable) - \ 283(Favourable) \\Total \, direct \, materials \, variance = \ 18 \, Unfavourable$

Total Direct Materials Variance is equal to $18, that is Unfavourable in nature.

Calculating further the Material Price Variance when the actual number of quarts of oil purchased in June had been 6,100 quarts:

$3. \rm\,Material \,Price \,Variance= (Actual\, Price \times Actual \, Quantity) - (Standard\, Price \times \times Actual\, Quantity)\\\rm\,\\Material \,Price \,Variance = ( 5.10 \times 6,100) - ( 5.05 \times 6,100) \\\rm\,\\Material \,Price \,Variance = \ 31110 - \ 30805\\\rm\,\\Material\, Price \,Variance= 305, \,\rm\,Unfavourable$

Hence, The total Direct materials variance for oil for June is $18, an Unfavourable outcome, and Material Price Variance is $305, which gives an unfavourable outcome at the time of purchase of 6,100 quarts for June.

To learn more about Materials Variance, refer to the link:

https://brainly.com/question/25417216