Problem 2 - Comprehensive Variance Analysis - GC Toy Company manufactures a plastic swimming pool. The company has been experiencing problems as shown by its June contribution format income statement below:

	Flexible Budget	Actual
Sales (3,000 pools)	$179,000	$ 179,000
Variable expenses:
Variable cost of goods sold*	33,390	44,540
Variable selling expenses	11,000	11,000
Total variable expenses	44,390	55,540
Contribution margin	134,610	123,460
Fixed expenses:
Manufacturing overhead	50,000	50,000
Selling and administrative	75,000	75,000
Total fixed expenses	125,000	125,000
Net operating income (loss)	$ 9,610	$ (1,540)

*Contains direct materials, direct labor, and variable manufacturing overhead.

Sharon Lymon, who has just been appointed general manager of the manufacturing facility, has been given instructions to get things under control. Upon reviewing the 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	Standard Price or Rate		Standard Cost
Direct materials	3.6 pounds	$ 2.00	per pound	$ 7.20
Direct labor	0.5 hours	$ 6.60	per hour	3.30
Variable manufacturing overhead	0.3 hours*	$ 2.10	per hour	0.63
Total standard cost per unit				$ 11.13

*Based on machine-hours.

During June the plant produced 3,000 pools and incurred the following costs:

Purchased 15,800 pounds of materials at a cost of $2.45 per pound.

Used 10,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

Worked 2,100 direct labor-hours at a cost of $6.30 per hour.

Incurred variable manufacturing overhead cost totaling $3,000 for the month. A total of 1,200 machine-hours was recorded.

It is the companys policy to close all variances to cost of goods sold on a monthly basis.

1. Compute the following variances for June (show your work):

a. Materials price and quantity variances.

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.