Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below Budgeted Actual $255,000 $255,000 Sales (7,000 pools) Variable expenses Variable cost of goods sold* 85.400 104,590 15.000 15.000 Variable selling expenses Total variable expenses Contribution margin Fixed expenses 100,400 119.590 154,600 135,410 Manufacturing overhead Selling and administrative 64.000 64.000 79,000 79,000 143.000 143.000 $ 11,600 $ (7,590) Total fixed expenses Net operating income (loss) Contains direct materials, direct labor, and variable manufacturing overhead Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to "get things under control." Upon reviewing the plant's income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool Standard Quantity Standard Price Standard or Hours 4.0 pounds 0.3 hours 0.2 hours* or Rate $2.40 per pound $7.00 per hour $2.50 per hour Cost Direct materials Direct labor Variable manufacturing overhead $ 9.60 2.10 0.50 Total standard cost $12.20 *Based on machine-hours During June the plant produced 7,000 pools and incurred the following costs a. Purchased 33,000 pounds of materials at a cost of $2.85 per pound b. Used 27,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 2,700 direct labor-hours at a cost of $6.70 per hour, d. Incurred variable manufacturing overhead cost totaling $4,930 for the month. A total of 1,700 machine-hours was recorded It is the company's policy to close all variances to cost of goods sold on a monthly basis