Calculating the Direct Materials Price Variance and the Direct Materials Usage V

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. 301Unfavorable MPV MUV 282.80 Favorable 2. Calculate the total direct materials variance for oil for June. If required, round your answer to the nearest cent. 18.2 Unfavorable 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? What would be the materials price variance (MPV)? 305 Unfavorable What would be the materials usage variance (MUV)? If required, round your answer to the nearest cent. 121.2 X Favorable

Explanation / Answer

3) Material usage variance = (Standard quantity-actual quantity)Standard price

                                            = (980*6.2-6020)5.05

Material usage variance = 282.80 Favorable

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