Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The standard cost for one pool is as follows: Standard Cost Direct materials Direct labour Variable manufacturing overhead Total standard cost Standard Quantity or Hours 1.20 kilograms 0.80 hours 0.30 machine-hours Standard Price or Rate $5.00 per kilogram $4.00 per hour $3.00 per machine-hour $ 6.00 3.20 0.90 $10.10 The plant has been experiencing problems for some time, as is shown by its June income statement when it made and sold 14,800 pools; the normal volume is 14,950 pools per month. Fixed costs are allocated using machine-hours. Flexible Budgeted $444,000 Actual $444,000 Sales (14,800 pools) Less: Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Less: Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net income 149,480 19,700 169, 180 274,820 156,270 19,700 175,970 268,030 128,000 82,880 210,880 $ 63,940 128,000 82,880 210,880 $ 57,150 *Contains direct materials, direct labour, and variable manufacturing overhead. Janet Dunn, the general manager of the Westwood Plant, wants to get things under control. She 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. Dunn learns the following about operations and costs in June: a. 30,100 kilograms of materials were purchased at a cost of $3.70 per kilogram. b. 24,200 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 $5 per hour. d. Variable manufacturing overhead cost totalling $15,400 for the month was incurred. A total of 4,400 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. 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).) Answer is complete but not entirely correct. Material price variance Material quantity variance $ 31,200 XF $ 18,900 X U 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).) Answer is complete but not entirely correct. Labour rate variance Labour efficiency variance $(11,800) $ 240 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).) Answer is complete but not entirely correct. U Variable overhead spending variance Variable overhead efficiency variance $(10,750) $ 3,240 F 2-a. Summarize the variances you computed in part (1) by showing the net overall favourable or unfavourable variance for the month. (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Answer is complete but not entirely correct. Net variance $ (6,770) U 2-b. What impact did this figure have on the company's income statement? Answer is complete but not entirely correct. This will cause the cost of Goods Sold to go down X thereby increasing net income by that amount. 3. Pick out the two most significant variances you computed in part (1). (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Materials price variance Materials quantity variance Labour rate variance Variable overhead efficiency variance 2 Variable overhead spending variance ? Labour efficiency variance 4. Compute the fixed overhead cost variances. (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) X Answer is complete but not entirely correct. $ 0 F x Fixed overhead budget variance Fixed overhead volume variance $ 2,116 X U 5. This part of the question is not part of your Connect assignment