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 BudgetActualSales (4,000 pools)$275,000$275,000Variable expenses:Variable cost of goods sold*74,72090,040Variable selling expenses27,000

27,000Total variable expenses101,720

117,040Contribution margin173,280

157,960Fixed expenses:Manufacturing overhead68,00068,000Selling and administrative93,00093,000Total fixed expenses161,000

161,000Net operating income (loss)$12,280$(3,040

)

*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: