Question Details

(Solved) Cornerstone Exercise 9.


Cornerstone Exercise 9.1 (Algorithmic) 
Calculating Standard Quantities for Actual Production

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 30 minutes and 6.8 quarts of oil are used. In June, Guillermo's Oil and Lube had 940 oil changes.

Required:

1. Calculate the number of quarts of oil that should have been used (SQ) for 940 oil changes.
  _________________   quarts

2. Calculate the hours of direct labor that should have been used (SH) for 940 oil changes.
  _________________   direct labor hours

3. What if there had been 930 oil changes in June? Would the standard quantities of oil (in quarts) and of direct labor hours be higher or lower than the amounts calculated in Requirements 1 and 2?
  _________________  

What would the new standard quantities be? Round your answers to two decimal places.

SQ   _________________   quarts
SH   _________________   direct labor hours


2.

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Cornerstone Exercise 9.2 (Algorithmic) 
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)?

$   _________________     _________________  



3.

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Cornerstone 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):
$   _________________     _________________  



4.

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Cornerstone Exercise 9.6 (Algorithmic) 
Calculating the Total Overhead Variance

Standish Company manufactures consumer products and provided the following information for the month of February:

Units produced 131,300
Standard direct labor hours per unit 0.2
Standard variable overhead rate (per direct labor hour) $3.40
Actual variable overhead costs $88,700
Actual hours worked 26,850

Required:

1. Calculate the total variable overhead variance.
$   _________________       _________________  

2. What if actual production had been 128,500 units? How would that affect the total variable overhead variance? Indicate what the new variance would be below.
$   _________________       _________________  



5.

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Cornerstone Exercise 9.7 (Algorithmic) 
Calculating the Variable Overhead Spending and Efficiency Variances

Standish Company manufactures consumer products and provided the following information for the month of February:

Units produced 131,300
Standard direct labor hours per unit 0.2
Standard variable overhead rate (per direct labor hour) $3.40
Actual variable overhead costs $88,700
Actual hours worked 26,850

Required:

1. Calculate the variable overhead spending variance using the formula approach. (If you compute the actual variable overhead rate, carry your computations out to five significant digits and round the variance to the nearest dollar.) 
$   _________________       _________________  

2. Calculate the variable overhead efficiency variance using the formula approach. 
$   _________________       _________________  

3. What if 26,100 direct labor hours were actually worked in February? What impact would that have had on the variable overhead spending variance?
  _________________       _________________  

What impact would that have had on the variable overhead efficiency variance? 
  _________________       _________________  



6.

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Cornerstone Exercise 9.8 (Algorithmic) 
Calculating the Fixed Overhead Spending and Volume Variances

Standish Company manufactures consumer products and provided the following information for the month of February:

Units produced 131,100
Standard direct labor hours per unit 0.2
Standard fixed overhead rate (per direct labor hour) $2.40
Budgeted fixed overhead $64,900
Actual fixed overhead costs $68,400
Actual hours worked 26,750

Required:

1. Calculate the fixed overhead spending variance using the formula approach.
$   _________________       _________________  

2. Calculate the volume variance using the formula approach.
$   _________________       _________________  

3. What if 127,600 units had actually been produced in February? What impact would that have had? Indicate what the new variances would be below.

Fixed Overhead Spending Variance $   _________________     _________________  
Volume Variance $   _________________     _________________  

 


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