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:

* 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 good sold. She has been provided with the following standard cost per swimming pool:

*based on machine-hours.

During June, the plant produced 5000 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 and production. (finished goods and work in process. Inventories are insignificant and can be ignored.)

c. worked 3100 direct labor hours at a cost of $5.90 per hour.

d. incurred variable manufacturing overhead cost totaling $4830 for the month. A total of 2300 machine hours was recorded.

It is the companies policy to close all variances to cost of good sold on a monthly basis.

1. Compute the following variances for June:

a. Materials price and quantity variances.

b. Labor rate and efficency variances.

c. Variable overhead rate and efficency variances.

2. summarize the variances you computed in requirement 1 by showing the net overall favorable or unfavorable variance for the month.

Sales (5,000 pools ) Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) \begin{tabular}{rr} \begin{tabular}{c} Flexible \\ Budget \end{tabular} & \multicolumn{1}{c}{ Actual } \\ $200,000 & $200,000 \\ \hline 54,100 & 67,330 \\ 16,000 & 16,000 \\ \hline 70,100 & 83,330 \\ \hline 129,900 & 116,670 \\ \hline 52,000 & 52,000 \\ 67,000 & 67,000 \\ \hline 119,000 & 119,000 \\ \hline$10,900 & $(2,330) \\ \hline \end{tabular} \begin{tabular}{lrrr} & Standard Quantity or & & Standard \\ & Hours & Standard Price or Rate & 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 \\ \hline Total standard cost per unit & & & $10.82 \\ \hline \end{tabular}