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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: Actual Budgeted Sales 3,000 pools) $250,000 $250,000 Variable expenses 67.000 Variable cost of goods sold' 53,430 Variable selling expenses 26,000 26,000 Total variable expenses 79,430 93,000 Contribution margin 70,570 157,000 Fixed expenses Manufacturing overhead 67,000 67,000 Selling and administrative 92,000 92,000 Total fixed expenses 59,000 59,000 Net operating income *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 Price Standard Cost or Rate Standard Quantity or Hours Direct materials 4.2 pounds $2.80 per pound 76 $8.30 per hour 4.15 Direct labor 0.5 hours Variable manufacturing overhead 0.5 hours $3.80 per hour 90 Total standard cost 17.81
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