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 Sales (4.000 pools) $ 180,000 $ 180,000 Variable expenses: Variable cost of goods sold 37,720 49,210 Variable selling expenses 15,000 15,000 Total variable expenses 52,720 64.210 Contribution margin 127,280 115.790 Fixed expenses: Manufacturing overhead 51,000 51,000 Selling and administrative 66,000 66 000 Total fixed expenses 117,000 117.000 Net operating income (loss) $ 10,280 $ (1.210) *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 Quantity or Hours 3.1 pounds 0.4 hours 0.3 hours Standard Price or Rate $ 2.10 per pound $ 6.10 per hour $ 1.60 per hour Standard Cost $ 6.51 2.44 Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit *Based on machine-hours. 0.48 $ 9.43 *Based on machine-hours, During June, the plant produced 4,000 pools and incurred the following costs: a. Purchased 17,400 pounds of materials at a cost of $2.55 per pound. b. Used 12,200 pounds of materials in production (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 2,200 direct labor-hours at a cost of $5.80 per hour. d. Incurred variable manufacturing overhead cost totaling $3,000 for the month. A total of 1,500 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. Required: 1. Compute the following variances for June: a. Materials price and quantity variances. b. Labor rate and efficiency variances. c. Variable overhead rate and efficiency variances. 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. Complete this question by entering your answers in the tabs below. Required Required 2 1a. 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 1. Material price variance Material quantity variance 15. Laborrate variance Labor efficiency variance te Variable overhead rate variance Variable overhead officiency variance Required: 1. Compute the following variances for June: a. Materials price and quantity variances. b. Labor rate and efficiency variances. C. Variable overhead rate and efficiency variances. 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. Complete this question by entering your answers in the tabs below. Required 1 Required 2 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.) Show less Net variance
