Comprehensive Variance Analysis Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below: Budgeted Actual $450,000 $450,000 Sales (15,000 pools) Variable expenses: 180,000 20,000 200,000 250,000 196,290 20,000 216,290 233,710 Fixed expenses: 130,000 84,000 214,000 $ 36,000$ 19,710 130,000 84,000 214,000 The revenue variance is labeled favorable (unfavorable) when the revenue in the flexible budget is greater than (less than) the planning budget. The expense varlances are labeled favorable (unfavorable) when the expense in the flexible budget is less than (greater than) the planning budget. Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to "get things under control." Upon reviewing the plant's income statement, Ms Dunn has concluded that the major problem lies in the variable cost of goods sold. She has beern provided with the following standard cost per swimming pool Standard Standard Price Quantity or Hours Rate 3.0 pounds 0.8 hours 4 hours* $2.00 per poun $6.00 per hour $3.00 per hour The revenue variance is labeled favorable (unfavorable) when the actual revenue is gre than) the flexible budget. The expense variances are labeled favorable (unfavorable) wh expense is less than (greater than) the flexible budget. During June the plant produced 15,000 pools and incurred the following costs a. Purchased 60,000 pounds of materials at a cost of $1.95 per pound b. Used 49,200 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. worked 11,800 direct labor-hours at a cost of $7.00 per hour. d. Incurred variable manufacturing overhead cost totaling $18,290 for the month. A total of 5,900 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis Required 1. Compute the following variances for June: a. Materials price and quantity variances b. Labor rate and efficiency variances C. Variable overhead rate and efficiency variances 2. Summarize the variances that you computed in requirement 1 by showing the net overall favorable or unfavorable variance for the month. What impact did this figure have on the company's income statement? Show computations 3. Pick out the two most significant variances that you computed in requirement 1. Explain to Ms Dunn possible causes of these variances