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It was the end of the third quarter for Crane Industries. There had been some discussion in prior quarters about best practices related to carrying ending inventory of its key DM$,$ acetic acid, for making vinegar. Per established standards, $7\mathrm{.}1$ ounces of acetic acid at a budgeted price of $\backslash (\backslash$$ $0\mathrm{.}30\backslash )$ per ounce were needed for each gallon of vinegar $(128$ ounces$).$ The new production manager wants to follow lean practices and buy only what is needed for production, while the former production manager preferred to keep some inventory on hand for emergencies. For the third quarter, $244,200$ ounces of acetic acid were purchased on account and used to make $33,000$ gallons of vinegar. The purchase price was $\backslash (\backslash$$ $68,376\backslash ).$

$($a$1)$

V Your answer is correct.

Determine the DM price and efficiency variances for the third quarter based on the information above.

DM price variance

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$\backslash$$

$\backslash ]$

DM efficiency variance

$\backslash (\backslash$$ $\backslash )$ Record the journal entries for the purchase and use of DM under standard costing. $($Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.$)$

Account Titles and Explanation

Debit

Credit

DM Price Variance

$($To record purchase of DM$)$

DM Efficiency Variance

$($To record use of DM$)$ Continuing with the details in part $($a$),$ assume there was a zero balance in the DM Inventory account to start the third quarter. What would the DM Inventory balance be at the end of the quarter? How much did Crane Industries pay per ounce for the acetic acid? $($Round amount per ounce to $2$ decimal places, e$.$g$.15\mathrm{.}25.)$

DM inventory balance $\backslash (\backslash$$ $\backslash )$

Crane industries pay

$\backslash$$

per ounce

Your answer is partially correct.

Suppose the company had instead purchased $257,700$ ounces of the DM at the same price per ounce as determined in part $($b$)$ but still used $244,200$ ounces for production. Recalculate the DM price and efficiency variances.

DM price variance

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DM efficiency variance

$\backslash (\backslash$$ $\backslash )$

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