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Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant is experiencing problems as shown by its June contribution format income

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

Flexible Budget Actual
Sales (15,000 pools) $ 675,000 $ 675,000
Variable expenses:
Variable cost of goods sold* 435,000 461,890
Variable selling expenses 20,000 20,000
Total variable expenses 455,000 481,890
Contribution margin 220,000 193,110
Fixed expenses:
Manufacturing overhead 130,000 130,000
Selling and administrative 84,000 84,000
Total fixed expenses 214,000 214,000
Net operating income (loss) $ 6,000 $ (20,890)

*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 concluded 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 $ 5.00 per pound $ 15.00
Direct labor 0.8 hours $ 16.00 per hour 12.80
Variable manufacturing overhead 0.4 hours* $ 3.00 per hour 1.20
Total standard cost per unit $ 29.00

*Based on machine-hours.

During June, the plant produced 15,000 pools and incurred the following costs:

  1. Purchased 60,000 pounds of materials at a cost of $4.95 per pound.
  2. Used 49,200 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
  3. Worked 11,800 direct labor-hours at a cost of $17.00 per hour.
  4. Incurred variable manufacturing overhead cost totaling $18,290 for the month. A total of 5,900 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:
    1. Materials price and quantity variances.
    2. Labor rate and efficiency variances.
    3. Variable overhead rate and efficiency variances.
  2. Summarize the variances you computed in requirement 1 by showing the net overall favorable or unfavorable variance for the month.

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.

Note: 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

1a. Material price variance $51,000selected answer incorrect Uselected answer incorrect
1a. Material quantity variance $231,000selected answer incorrect Fselected answer incorrect
1b. Labor rate variance $11,800selected answer correct Uselected answer correct
1b. Labor efficiency variance $176,000selected answer incorrect Fselected answer correct
1c. Variable overhead rate variance $0selected answer incorrect Noneselected answer incorrect
1c. Variable overhead efficiency variance $17,699selected answer incorrect Fselected answer correct

Summarize the variances you computed in requirement 1 by showing the net overall favorable or unfavorable variance for the month. Note: 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 $463,899selected answer incorrect Fselected answer incorrect

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