Mansbridge Moldings manufactures a plastic wagon at its MuskokaPlant. The standard cost for one wagon is as follows: Standard Quantity or Hours 1.40 kilograms 0.80 hours Standard Cost Direct materials Standard Price or Rate $5.00 per kilogram $ 7.00 Direct labour D:49 Variable manufacturing overhead e.se machine-hours $6.00 per hour $4.00 per machine-hour 4.80 2.00 Total standard cost $13.80 The plant has been experiencing problems for some time, as is shown by its June Income statement when it made and sold 15,000 pools, the normal volume is 15,150 pools per month. Fixed costs are allocated using machine- hours. Flexible Budgeted Actual Sales (15,000 pools) $450,000 $450,000 Less: Variable expenses: Variable cost of goods sold 207,000 209,990 Variable selling expenses 20,000 Total variable expenses 227,000 20,000 229,990 330 010 27 Variable selling expenses. 20,000 20,000 Total variable expenses 227,000 229,990 Contribution margin 223,000 220,010 Less: Fixed expenses: Manufacturing overhead 100,000 100,000 84,000 84,000 184,000 184,000 $ 39,000 $ 36,010 Selling and administrative Total fixed expenses Net income *Contains direct materials, direct labour, and variable manufacturing overhead. Peter Mansbridge, the general manager of the MuskokaPlant, wants to get things under control. He needs information about the operations in June since the income statement signalled that the problem could be due to the variable cost of goods sold. He obtains the following information about the operations and costs in June: a. 31,600 kilograms of materials were purchased at a cost of $4.00 per kilogram. b. 24,600 kilograms of materials were used in production. (Finished goods and work-in-process inventories are insignificant and can be ignored.) c. 11,800 direct labour-hours were worked at a cost of $8 per hour d. Variable manufacturing overhead cost totalling $24,190 for the month was incurred. A total of 5,900 machine- hours was recorded. 12 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. Direct materials price and quantity variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Material price variance Material quantity variance b. Direct labour rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) 56 Labour rate variance Labour efficiency variance c. Variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Variable overhead spending variance Variable overhead efficiency variance