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:

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:

Flexible Budget Actual Sales (4,000 pools) $250,000 $250,000 Variable expenses: Variable cost of goods sold* 66,760 81,190 Variable selling expenses 22,000 22,000 Total variable expenses 88,760 103,190 Contribution margin 161,240 146,810 Fixed expenses: Manufacturing overhead 63,000 63,000 Selling and administrative 88,000 88,000 Total fixed expenses 151,000 151,000 Net operating income (loss) $ 10,240 $ (4,190) ' *Contains direct materials, direct labor, and variable manufacturing overhead. Direct materials 3.8 pounds $ 2.40 per pound $ 9.12 Direct labor 0.? hours $ 7.90 per hour 5.53 Variable manufacturing overhead 0.6 hours* 3 3.40 per hour 2.04 Total standard cost per unit $ 16.69 *Based on machine-hours