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 (variable costing) income statement provided below:

	Budgeted	Actual
Sales (15,000 Pools)	$450,000	$450,000
Variable COGS*	$180,000	$196,290
Variable Selling & Admin	$20,000	$20,000
Total Variable Costs	$200,000	$216,290
Contribution Margin	$250,000	$233,710
Fixed Manuf. Overhead	$130,000	$130,000
Fixed Selling & Admin	$84,000	$84,000
Total Fixed Costs	$214,000	$214,000
Net Operating Income	$36,000	$19,710

*Contains direct materials, direct labor, and variable manufacturing overhead (variable costing)

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 plants 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 or Hours	Standard Price or Rate	Standard Cost
Direct Materials	3.0 Pounds	$2.00 per Pound	$6.00 per Pool
Direct Labor	0.8 Labor Hours	$6.00 per Labor Hour	$4.80 per Pool
Variable Mfg OH	0.4 Machine Hours	$3.00 per machine Hour	$1.20 per Pool
Total Standard Cost			$12.00 per Pool

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 cost totaling $18,290 for the month. A total of 5,900 machine hours was recorded.

Required:

Compute the materials price and quantity variances.

Compute the labor rate and efficiency variances.

Compute the variable overhead rate and efficiency variances.

What is the net overall favorable or unfavorable variance for the month? What impact did this figure have on the companys income statement?

Explain to Janet Dunn what the two most significant variances are and what are possible causes of these variances.