Portland Company's Ironton Plant produces precast ingots for industrial use Carlos Santiago, who was recently appointed general manager of the Ironton Plant, has just been handed the plant's contribution format income statement for October. The statement is shown below Sales (7,000 ingots) $255,000 $255,000 Variable expenses Variable cost of goods sold 85,400 104,590 Variable selling expenses Total variable expenses Contribution margin Fixed expenses 5,000 15,000 100,400 119,590 154,600 135,410 Manufacturing overhead Selling and administrative 64,000 64,000 79,00079,000 143,000143,000 S 11,600 $ (7,590) Total fixed expenses Net operating income (loss) Contains direct materials, direct labor, and variable manufacturing overhead Mr Santiago was shocked to see the loss for the month, particularly because sales were exactly as budgeted He stated, "I sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem" The plant does use a standard cost system, with the following standard variable cost per ingot Standard Quantity Standard Price Standard or Hours 4 0 pounds 0 3 hours or Rate Direct materials Direct labor Variable manufacturing overhead Total standard variable cost Cost 960 2.10 0 50 $2 40 per pound $7 00 per hour 02 hours $250 per hour 050 $12.20