Problem 10-15 Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]

Miller Toy Company manufactures a plastic sw mming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below Budgeted Actual Sales (4,000 pools) 210,000 $210,000 Variable expenses 50,680 63,710 Variable cost of goods sold* Variable selling expenses 12.000 12.000 Total variable expenses 62.680 75.710 Contribution margin 147.320 134.290 Fixed expenses Manufacturing overhead 61,000 61,000 Selling and administrative 76,000 76.000 Total fixed expenses 137.000 137.000 Net operating income (loss) 10,320 (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 es in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool. dard Standard Quantity Standard Price or Hours or Rate Direct materials 3.7 pounds $2.10 per pound 7.77 0.6 hours Direct labor $6.70 per hour 4.02 Variable manufacturing overhead 0.4 hours $2.20 per hour 0.88 Total standard cost 12.67 Based on machine-hours