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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

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:

Budgeted Actual
Sales (5,000 pools) $ 200,000 $ 200,000
Variable expenses:
Variable cost of goods sold* 54,100 67,330
Variable selling expenses 16,000 16,000
Total variable expenses 70,100 83,330
Contribution margin 129,900 116,670
Fixed expenses:
Manufacturing overhead 52,000 52,000
Selling and administrative 67,000 67,000
Total fixed expenses 119,000 119,000
Net operating income (loss) $ 10,900 $ (2,330)
*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 3.2 pounds $ 2.20 per pound $ 7.04
Direct labor 0.5 hours $ 6.20 per hour 3.10
Variable manufacturing overhead 0.4 hours* $ 1.70 per hour 0.68
Total standard cost $ 10.82
*Based on machine-hours.

During June the plant produced 5,000 pools and incurred the following costs:
a.

Purchased 21,000 pounds of materials at a cost of $2.65 per pound.

b.

Used 15,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

c. Worked 3,100 direct labor-hours at a cost of $5.90 per hour.
d.

Incurred variable manufacturing overhead cost totaling $4,830 for the month. A total of 2,300 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.

Materials price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Material price Variance:

Material Quantity variance:

b.

Labor rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Labor rate variance:

Labor effiency variance:

c.

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).)

Variable overhead rate variance:

Variable overhead effciency variance:

2.

Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Materials price variable

Material Quantity Variance

Labor rate variance

Labor effiency variance

Variable overhead rate variance

Variable overhead effiency variance

Net vairance.

3.

Pick out the two most significant variances that you computed in (1) above. (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

Materials price variance
Labor efficiency variance
Variable overhead efficiency variance
Labor rate variance
Variable overhead rate variance
Materials quantity variance

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