NSF Lube is a fast-growing chain of oil-change stores. The following data are av
ID: 2584196 • Letter: N
Question
NSF Lube is a fast-growing chain of oil-change stores. The following data are available for last year's services NSF Lube performed 466,200 oil changes last year. It had budgeted 435,600 oil changes, averaging 12 minutes each. Standard variable labor and support costs per oil change were as follows: Direct oil specialist services: 12 minutes at $27 per hour Variable support staff and overhead: 10.5 minutes at $16 per hour $5.40 2.8 Fixed overhead costs: Annual budget $1,039,600 Fixed overhead is applied at the rate of $4.20 per oil change Actual oil change costs: Direct oil specialist services: 466,200 changes averaging 13 minutes at $30 per hour Variable support staff and overhead: 0.20 labor-hours at $15 per hour x 466,200 changes Fixed overhead 3,030,300 1,398,600 1,470,000 Required: a. Prepare a cost variance analysis for each variable cost for last year. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or U" for unfavorable. If there is no effect, do not select either option.) Price Variance Efficiency Variance Total Variance Oil specialist Variable overheadExplanation / Answer
Oil Specialist:
AQ=466,200 changes×13/60=101,010 hours
SQ allowed=466,200×12/60=93,240 hours
Price variance=AQ ×(AP-SP)
=101,010 hours ($30-$27)
=$303,030 U
Efficiency variance=SP×(AQ-SQ )
=$27×(101,010-93,240)
=$209,790 U
Cost variance (total variance)=209,790 U + 303,030 U
=$513,820 U
Variable overhead:
SQ allowed=466,200 changes×10.5/60=81,585 hours
AQ=466,200 changes×.20 hours=93,240 hours
Price variance=AQ ×(AP-SP)
=93,240 hours ($15-$16)
=$93,240 F
Efficiency variance=SP×(AQ-SQ )
=$16×(93,240-81,585)
=$186,480 U
Variable overhead cost variance=$93,240 F + $186,480 U
=$93,240 U
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