Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems for some time as shown by its June contribution format income statement below:

	Budgeted	Actual
Sales (15,500 pools)	$511,500	$511,500
Less variable expenses:
Variable cost of goods sold*	232,965	243,970
Variable selling expenses	21,700	21,700
Total variable expenses	254,665	265,670
Contribution margin	256,835	245,830
Less fixed expenses:
Manufacturing overhead	120,000	120,000
Selling and administrative	86,000	86,000
Total fixed expenses	206,000	206,000
Net operating income	$ 50,835	$ 39,830

*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 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	$2.05	per pound	$ 6.15
Direct labor	0.8	hour	$9.50	per hour	7.60
Variable manufacturing overhead	0.4	hour *	$3.20	per hour	1.28
Total standard cost					$15.03
* Based on machine-hours.

Ms. Dunn has determined that during June the plant produced 15,500 pools and incurred the following costs:

a. Purchased 58,000 pounds of materials at a cost of $2.00 per pound.

b. Used 51,000 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

c. Worked 12,100 direct labor-hours at a cost of $10.20 per hour.

d. Incurred variable manufacturing overhead cost totaling $18,900 for the month. A total of 6,000 machine-hours was recorded.

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

Required:

1. Compute the following variances for June:

a. Direct materials price and quantity variances.

b. Direct labor rate and efficiency variances.

c. Variable overhead spending 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. What impact did this figure have on the companys income statement? Show computations.

3. Pick out the two most significant variances that you computed in (1) above. Explain to Ms. Dunn possible causes of these variances.