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London Company's Forest City Plant produces precast ingots for industrial use. Anne-Marie Gosnell, who was recently appointed general manager of the Forest City Plant,

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London Company's Forest City Plant produces precast ingots for industrial use. Anne-Marie Gosnell, who was recently appointed general manager of the Forest City Plant, has just been handed the plant's income statement for October. The statement is shown below. Gosnell was shocked to see the poor results for the month, particularly since sales were exactly as budgeted. She stated, "I sure hope the plant has a standard costing system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem." Sales (2,500 ingots) Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Budgeted Actual $125,000 $125,000 40,000 45,455 10,000 10,000 50,000 55,455 75,000 69,545 30,000 29,500 37,500 37,500 67,500 67,000 Total fixed expenses Operating income (loss) $ 7,500 $ 2,545 *Contains direct materials, direct labour, and variable manufacturing overhead. The plant uses a standard costing system, with the standard variable cost per ingot details shown below: Standard Standard Quantity or Hours Standard Price or Rate 2.0 kilograms 0.54 hours $ 1.25 per kilogram $10.00 per hour $1.00 per hour Cost $2.50 5.40 0.27 $8.17 Direct materials Direct labour Variable manufacturing overhead 0.27 hours* Total standard variable cost *Based on machine-hours. Gosnell has determined that during October the plant produced 2,500 ingots and incurred the following costs: a. Purchased 6,300 kilograms of materials at a cost of $1.50 per kilogram. There were no raw materials in inventory at the beginning of the month.

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