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GaryK [48]
2 years ago
5

Calculating the Direct Materials Price Variance and the Direct Materials Usage Variance Guillermo's Oil and Lube Company is a se

rvice 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:
a. Calculate the direct materials price variance (MPV) and the direct materials usage variance (MUV) for June using the formula approach.
b. Calculate the total direct materials variance for oil for June.
Business
1 answer:
galben [10]2 years ago
7 0

Answer:

Results are below.

Explanation:

<u>To calculate the direct material price variance, we need to use the following formula:</u>

Direct material price variance= (standard price - actual price)*actual quantity

Direct material price variance= (5.05 - 5.1)*6,020

Direct material price variance= $301 unfavorable

<u>To calculate the direct material quantity variance, we need to use the following formula:</u>

Direct material quantity variance= (standard quantity - actual quantity)*standard price

Direct material quantity variance= (6,076 - 6,020)*5.05

Direct material quantity variance= $282.8 favorable

Standard quantity= 980*6.2= 6,076

<u>Finally, the total direct material variance:</u>

Total direct material variance= Direct material quantity variance - Direct material price variance

Total direct material variance= 282.8 - 301

Total direct material variance= $18.2 unfavorable

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Answer:

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Unit variable cost = $13 $(7+4+2)

Total Variable Costs = 90,000 x $13 = $1,170,000

Fixed Costs = $225,000

Total Costs = $1,395,000

ii) Production level of 105,000 units:

Total Variable costs = 105,000 x $13 = $1,365,000

Fixed Costs = $225,000

Total Costs = $1,590,000

iii) Production level of 120,000 units:

Total Variable costs = 120,000 x $13 = $1,560,000

Fixed Costs = $225,000

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b) If AP sells the toaster ovens for $18 each, to make a profit of $309,000 before taxes, units to be sold are:

Break-even Point + Target Profit =  (Fixed Cost + Target Profit)/Contribution per unit

Contribution per unit = $18 - $13 = $5

= ($225,000 + $309,000)/ $5

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= 106,800 units

Explanation:

a) A flexible budget tries to change the level of output.  It is a technique used to assess performance under different volumes or activities.  It helps management to make the right decisions, given the fact that different levels of activity may call for different cost and revenue reflections.

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What is the purpose of this presentation to persuade?

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If we look back at the idea of motive, in this speech the prosecuting attorney would try to convince the jury members that the defendant is guilty beyond reasonable doubt.

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Answer:

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At 2016 the sales revenue should be the present value of 1,000 dollars not the complete 1,000 dollars. Thus, is overstated.

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