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 $200,000 $200,000 Sales (5,000 ingots) Variable expenses Variable cost of goods sold Variable selling expenses 54.100 16,000 67,330 16,000 Total variable expenses 70,100 83,330 Contribution margin 129,900 116,670 led expenses Manufacturing overhead Selling and administrative 52,000 67,000 52,000 67,000 119,000 S 10,900 (2,330) Total fixed expenses 119,000 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, "I 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 problem." The plant does use a standard cost system, with the following standard variable cost per ingot: Standard Quatity Standard Price Standard or Hours or Rate Cost 7.04 Direct materials Direct labor Variable manufacturing overhead 0.4 hours 3.2 pounds $2.20 per pound 0.5 hours $6.20 per hour $1.70 per hour 0.68 Total standard variable cost $10.82 *Based on machine-hours During October the plant produced 5,000 ingots and incurred the following costs a. Purchased 21,000 pounds of materials at a cost of $2.65 per pound. There were no raw materials in inventory at the beginning of the month b. Used 15,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) C. Worked 3,100 direct labor-hours at a cost of $5.90 per hour d. Incurred a total variable manufacturing overhead cost of $4,830 for the month. A total of 2,300 machine- hours was recorded It is the company's policy to close all variances to cost of goods sold on a monthly basis