Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The standard cost for one pool is as follows:

Standard Quantity or Hours Standard Price or Rate Standard

Cost

Direct materials 1.20 kilograms $ 4.00 per kilogram $ 4.80

Direct labour 0.80 hours $ 6.00 per hour 4.80

Variable manufacturing overhead 0.40 machine-hours $ 3.00 per machine-hour 1.20

Total standard cost $ 10.80

The plant has been experiencing problems for some time, as is shown by its June income statement when it made and sold 15,100 pools; the normal volume is 15,250 pools per month. Fixed costs are allocated using machine-hours.

Flexible Budgeted Actual

Sales (15,100 pools) $ 453,000 $ 453,000

Less: Variable expenses:

Variable cost of goods sold* 163,080 201,835

Variable selling expenses 20,100 20,100

Total variable expenses 183,180 221,935

Contribution margin 269,820 231,065

Less: Fixed expenses:

Manufacturing overhead 131,000 131,000

Selling and administrative 84,560 84,560

Total fixed expenses 215,560 215,560

Net income $ 54,260 $ 15,505

*Contains direct materials, direct labour, and variable manufacturing overhead.

Janet Dunn, the general manager of the Westwood Plant, wants to get things under control. She needs information about the operations in June since the income statement signalled that the problem could be due to the variable cost of goods sold. Dunn learns the following about operations and costs in June:

30,100 kilograms of materials were purchased at a cost of $3.90 per kilogram.

22,000 kilograms of materials were used in production. (Finished goods and work-in-process inventories are insignificant and can be ignored.)

11,900 direct labour-hours were worked at a cost of $8 per hour.

Variable manufacturing overhead cost totalling $21,645 for the month was incurred. A total of 5,850 machine-hours was recorded.

It is the companys policy to close all variances to cost of goods sold on a monthly basis.

Required:

1. Variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

2-a. Summarize the variances you computed in part (1) by showing the net overall favourable or unfavourable variance for the month. (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

4. Compute the fixed overhead cost variances. (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)