Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The standard cost for one pool is as follows:

	Standard Quantity or Hours		Standard Price or Rate			Standard Cost
Direct materials	1.20	kilograms	$	5.00	per kilogram	$	6.00
Direct labour	0.90	hours	$	6.00	per hour		5.40
Variable manufacturing overhead	0.30	machine-hours	$	4.00	per machine-hour		1.20
Total standard cost						$	12.60

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		Actual
Sales (14,800 pools)	$	444,000	$	444,000
Less: Variable expenses:
Variable cost of goods sold*		186,480		187,280
Variable selling expenses		19,700		19,700
Total variable expenses		206,180		206,980
Contribution margin		237,820		237,020
Less: Fixed expenses:
Manufacturing overhead		128,000		128,000
Selling and administrative		82,880		82,880
Total fixed expenses		210,880		210,880
Net income	$	26,940	$	26,140

*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:

1. 31,200 kilograms of materials were purchased at a cost of $3.90 per kilogram.
2. 24,500 kilograms of materials were used in production. (Finished goods and work-in-process inventories are insignificant and can be ignored.)
3. 11,700 direct labour-hours were worked at a cost of $7 per hour.
4. Variable manufacturing overhead cost totalling $17,200 for the month was incurred. A total of 4,000 machine-hours was recorded.

It is the companys 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).)

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).)

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).)

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).)

2-b. What impact did this figure have on the company's income statement?

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.)

check all that apply

• Materials price varianceunanswered
• Materials quantity varianceunanswered
• Labour rate varianceunanswered
• Variable overhead efficiency varianceunanswered
• Variable overhead spending varianceunanswered
• Labour efficiency varianceunanswered

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