Slick Corporation is a small producer of synthetic motor oil. During May, the co

Question

Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains twelve quarts of synthetic oil. To achieve this level of production, Slick purchased and used 16,500 gallons of direct materials at a cost of $20,283. It also incurred average direct labor costs of $14 per hour for the 4,294 hours worked in May by its production personnel. Manufacturing overhead for the month totaled $9,736, of which $2,200 was considered fixed. Slick's standard cost information for each case of synthetic motor oil is as follows:

   Direct materials standard price $ 1.30   per gallon    Standard quantity allowed per case
3.25   gallons    Direct labor standard rate $ 16 per hour    Standard hours allowed per case 0.75 direct labor hours    Fixed overhead budgeted $ 2,600 per month    Normal level of production 5,200 cases per month    Variable overhead application rate $ 1.50   per case    Fixed overhead application rate ($2,600

Explanation / Answer

a.

Material Price Variance = ( SP ? AP )

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