PROBLEM 10-18 Comprehensive Variance Analysis LO10-1, LO10-2, LO10-3 Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant been experiencing problems as shown by its June contribution format income statem estwood Plant. The plant has l income statement below: Flexible Budget Actual $675,000 $675,000 461,890 Sales (15,000 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)....... 435,000 20,000 455,000 220,000 20,000 481,890 193,110 130,000 84,000 214,000 130,000 84,000 214,000 $ (20,890) $ 6,000 *Contains direct materials, direct labor, and variable manufacturing overhead Janet Dunn, who has just been appointed general manager of the Westwoo instructions to "get things under control." Upon reviewing the plante income.se Vestwood Plant, has bec has been gries meni, Ms Dan be maior problem lies in the variable cost of goods sold. She has been provided standard cost per swimming pool: has concluded that the ith the following standard co Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials Direct labor. 3.0 pounds 0.8 hours 0.4 hours $5.00 per pound $16.00 per hour $3.00 per hour Variable manufacturing overhead $15.00 12.80 1.20 $29.00 Total standard cost per unit..... Based on machine-hours. During June the plant prod a. Purchased 60,000 pounds b. Used 49,200 pounds of Lune the plant produced 15,000 pools and incurred the following costs: d 60.000 pounds of materials at a cost of $4.95 per pound. 119 200 pounds of materials in production. (Finished goods and work in process invento- ries are insignificant and can be ignored.) Worked 11.800 direct labor-hours at a cost of $17.00 per hour. Incurred variable manufacturing overhead cost totaling $18,290 for the month. A total of 5.900 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. Required: 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. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. What impact did this figure have on the company's income statement? Show computations. Pick out the two most significant variances that you computed in (1) above. Explain to Ms. Dunn possible causes of these variances