Calculating Standard Quantities for Actual Production Guillermo\'s Oil and Lube

Question

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 24 minutes and 6.2 quarts of oil are used. In June, Guillermo's Oil and Lube had 980 oil changes.

Required:

1. Calculate the number of quarts of oil that should have been used (SQ) for 980 oil changes.
quarts

2. Calculate the hours of direct labor that should have been used (SH) for 980 oil changes.
direct labor hours

3. What if there had been 970 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?

Higher

Lower

What would the new standard quantities be?

SQ quarts SH direct labor hours

Explanation / Answer

1.The number of quarts of oil that should have been used for 980 oil changes.

=> number of oil changes * standard quarts of oil.

=>980 oil changes * 6.2 quarts.

=>6,076 quarts.

2.direct labour hours.for 980 oil changes.

=>oil changes * standard time per oil change

=>980 * 24 minutes

=>23,520 minutes

=>392 hours.

3.If 970oil changes were made, standard quantities of oil and direct labour hours will be LOWER than the requirements calculated in requirements 1 and 2.

New standard quantities

Standard quantitiy (970 oil changes * 6.2 quarts) 6,014 quarts Standard hours (970 oil changes * 24 minutes /60) 388 direct labour hours

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