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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 $235,000 $235,000 Sales (5,000 pools) Variable expenses Variable cost of goods sold 71,350 13,000 86,370 Variable selling expenses Total variable expenses Contribution margin Fixed expenses 13,000 84,350 99,370 150,650 135,630 Manufacturing overhead Selling and administrative 62.000 62.000 77,000 77,000 139.000 139.000 $11,650 (3,370) Total fixed expenses Net operating income (loss) 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 Qantity Standard Price Standard or Hours or Rate Cost Direct materials Direct labor Variable manufacturing overhead 3.8 pounds 0.7 hours $2.20 per pound $ $6.80 per hour $2.30 per hour $ 8.36 4.76 1.15 hours Total standard cost $14.27 Based on machine-hours
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