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: Flexible Budget $ 179,000 Actual $ 179,000 Sales (3,000 pools) Variable expenses: 33,390 44,540 11,000 11,000 Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: 44,390 55,540 134,610 123,460 50,000 50,000 Manufacturing overhead Selling and administrative 75,000 75,000 Total fixed expenses 125,000 125,000 Net operating income (loss) $ 9,610 $ (1,540) *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 Quantity or Hours Direct materials Standard Price or Rate. $ 2.00 per pound 3.6 pounds Standard Cost $7.20 3.30 0.63 Direct labor 0.5 hours Variable manufacturing overhead 0.3 hours $ 6.60 per hour $ 2.10 per hour Total standard cost per unit $11.13 *Based on machine-hours. During June, the plant produced 3,000 pools and incurred the following costs: a. Purchased 15,800 pounds of materials at a cost of $2.45 per pound. b. Used 10,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 2,100 direct labor-hours at a cost of $6.30 per hour. d. Incurred variable manufacturing overhead cost totaling $3,000 for the month. A total of 1,200 machine-hours was recorded. It is the company's 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. b. Labor rate and efficiency variances. c. Variable overhead rate 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 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. (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 A
