AP It was the end of the third quarter for Van 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, 6.5 ounces of acetic acid at a budgeted price of $0.20 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, 250,500 ounces of acetic acid were purchased on account and used to make 37,600 gallons of vinegar. The purchase price was $45,090.

Required

a. Determine the DM price and efficiency variances for the third quarter based on the information above. Record the journal entries for the purchase and use of DM under standard costing.

b. 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 Van Industries pay per ounce for the acetic acid?

c. Suppose the company had instead purchased 265,000 ounces of the DM at the same price per ounce as determined in part (b) but still used 250,500 ounces for production. Recalculate the DM price and efficiency variances, and then record the journal entries for the purchase and use of DM under standard costing.

d. Using the details in part (c), assume there was a zero balance in the DM Inventory account to start the third quarter. What would the DM Inventory account balance be at the end of the quarter? How much acetic acid does that include? At what price per ounce?