Problem 10-15 Comprehensive Variance Analysis (L010-1, LO10-2, LO10-3] 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 Actual Budget $ 210,000 $ 210,000 Sales (4,000 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) 50,680 12,000 62,680 147,320 63,710 12.000 75, 710 134,290 61,000 76,000 137,000 10,320 $ 61,000 76,000 137,000 (2,710) $ * 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 3.7 pounds 0.6 hours 0.4 hours* Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Price or Rate $ 2.10 per pound $ 6.70 per hour $ 2.20 per hour Standard Cost $ 7.77 4.02 0.88 $ 12.67 *Based on machine-hours. During June, the plant produced 4,000 pools and incurred the following costs: E a. Purchased 19,800 pounds of materials at a cost of $2.55 per pound. b. Used 14,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) E c. Worked 3,000 direct labor-hours at a cost of $6.40 per hour. d. Incurred variable manufacturing overhead cost totaling $4,940 for the month. A total of 1,900 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. Required: E 1. Compute the following variances for June: E a. Materials price and quantity variances. E 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