Problem 11-15 Comprehensive Variance Analysis [L011-1, LO11-2, L011-3] 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: BudgetedActual Sales (5,000 pools) Variable expenses $235,000 $ 235,000 Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: 71,350 13,000 84,350 150,650 86,370 13,000 99,370 135,630 Manufacturing overhead Selling and administrative Total fixed expenses Net operating income 62,000 77,000 139,000 $11,650 (3,370) 62,000 77,000 139,000 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 Price $2.20 per pound $6.80 per hour $2.30 per hour Standard Standard Quantity or Hours or Rate Cost Direct materials Direct labor Variable manufacturing overhead Total standard cost 3.8 pounds 0.7 hours 0.5 hours 8.36 4.76 1.15 $14.27 Based on machine-hours. During June the plant produced 5,000 pools and incurred the following costs a. Purchased 24,000 pounds of materials at a cost of $2.65 per pound. b. Used 18,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 4,100 direct labor-hours at a cost of $6.50 per hour d. Incurred variable manufacturing overhead cost totaling $7,560 for the month. A total of 2,800 machine-hours was recorded It is the company's policy to close all variances to cost of goods sold on a monthly basis Required: 1. Compute the following variances for June: a. Materials price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Material price variance Material quantity variance b. Labor rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Labor rate variance Labor efficiency variance c Vanable overhead rate and efficiency var ances. Do not round your intermediate calculations unfavorable, and "None" for no effect (i.e., zero variance).) n cate the effect of each variance by selecting vorable U 0. Variable overhead rate variance Variable overhead efficiency variance 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Summary of variances Material price variance Material quantity variance Labor rate variance Labor efficiency variance Variable overhead rate variance Variable overhead efficiency variance Net variance 3. Pick out the two most significant variances that you computed in (1) above. (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.) 2 Materials price variance 2Labor efficiency variance Variable overhead efficiency variance 2 Labor rate variance 2 Variable overhead rate variance 2 Materials quantity variance