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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. 1. Calculate the number of quarts of oil that should have been used ( SQ ) for 980 oil changes. 2. Calculate the hours of direct labor that should have been used ( SH ) for 980 oil changes. 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? What would the new standard quantities be?

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 9, Problem 1CE
Textbook Problem
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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.

  1. 1. Calculate the number of quarts of oil that should have been used (SQ) for 980 oil changes.
  2. 2. Calculate the hours of direct labor that should have been used (SH) for 980 oil changes.
  3. 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? What would the new standard quantities be?

1.

To determine

Compute the number of quarts of oil used for 980 oil changes (standard quantity).

Explanation of Solution

Standard quantity: It is the amount of direct material that is required to produce one unit of finished product. The allowance of normal wastage expected in the production process should be added to the direct material.

Compute the number of quarts of oil used for 980 oil changes (standard quantity):

Standard quantity of oil allowed(Standard quantity)=<

2.

To determine

Compute the number of direct labor hours used for 980 oil changes (standard hours).

3.

To determine

Calculate the new standard quantities if 970 oil changes in June instead of 980 and indicate the calculated standard quantities of oil and direct labor hours be higher or lower than the amounts calculated in Requirement 1&2.

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Chapter 9 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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