Michiana Company's Benton Harbor Plant produces precast ingots for industrial use. Angelo Lorenzo, who was recently appointed general manager of the Benton Harbor Plant, has just been handed the plant's contribution format income statement for October. The statement is shown below: Budgeted Actual $272,000 $272,000 Sales (5,000 ingots) Variable expenses: 84,250 99.765 Variable cost of goods sold Variable selling expenses 23,000 107,250 164,750 23,000 122,765 149,235 Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative 64,000 89,000 64,000 89,000 153,000 153,000 S 11,750 (3,765) Total fixed expenses Net operating income (loss) Contains direct materials, direct labor, and variable manufacturing overhead Mr. Lorenzo was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, "l sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problenm The plant does use a standard cost system, with the following standard variable cost per ingot Standard Quantity Standard Price Standard or Hours 3.9 pounds 0.8 hours 0.2 hours* or Rate Direct materials Direct labor Variable manufacturing overhead Cost 9.75 6.40 0.70 $2.50 per pound $8.00 per hour $3.50 per hour Total standard variable cost $16.85