Question
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant is experiencing problems. They had budgeted net operating of $36,000 while
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant is experiencing problems. They had budgeted net operating of $36,000 while actual net income is $19,710. The $16,290 budget variance was driven by the difference in variable costs of goods sold which was budgeted at $180,000 but the actual incurred was $196,290. Janet Dunn, the general manager of the has been given instructions to get things under control. Upon reviewing the plant's income statement, Ms. Dunn has concluded 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 Hours | or Rate | Cost |
Direct materials | 3.0 pounds | $2.00 per pound | $6.00 |
Direct labor | 0.8 hours | $6.00 per hour | 4.80 |
Variable manufacturing overhead | 0.4 hours | $3.00 per hour | 1.20 |
|
|
| $12.00 |
During June, the plant produced 15,000 pools and incurred the following costs
Purchased 60,000 pounds of materials at a cost of $1.95 per pound
Used 49,200 pounds of materials in production.
Worked 11,800 direct labor-hours at a cost of $7.00 per hour.
Incurred variable manufacturing overhead totaling $18,290 for the month. A total of 5,900 machine-hours was recorded
a. Compute the materials price and quantity variances for June. Show your work and computations.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started