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: Flexible Actual Budget 265,000 $ 265,000 Sales (8,000 pools) Variable expenses: Variable cost of goods sold Variable selling expenses 88,960 16,000 106,490 16,000 Total variable expenses 104,960 122,490 Contribution margin Fixed expenses: 160,040 142,510 Manufacturing overhead Selling and administrative Total fixed expenses 65,000 65,000 80,000 145,000 80,000 145,000 15,040 $ (2,490) 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 Standard Price Standard Quantity or or Rate Cost Hours 3.0 pounds 2.50 per pound $ 7.10 per hour $ 2.60 per hour Direct materials 7,50 Direct labor 0.4 hours 2.84 0.3 hours Variable manufacturing overhead 0.78 Total standard cost per unit 11.12 Based on machine-hours. During June, the plant produced 8,000 pools and incurred the following costs: a. Purchased 29,000 pounds of materials at a cost of $2.95 per pound. b. Used 23,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 3,800 direct labor-hours at a cost of $6.80 per hour. d. Incurred variable manufacturing overhead cost totaling $8,100 for the month. A total of 2,700 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. la. Compute the following variances for June, materials price and quantity variances. 1b. Compute the following variances for June, labor rate and efficiency variances 1c. Compute the following variances for June, variable overhead rate and efficiency variances. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Show less 1a. Material price variance Material quantity variance 1b Labor rate variance Labor efficiency variance Ic. Variable overhead variance Variable overhead efficiency variance Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Net variance
