Problem 8-18A Comprehensive Variance Analysis IL08-4, L08-5, L08-61 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: Budgeted Actual 200,000 $200,000 Sales (5,000 pools) Variable expenses: Variable cost of goods sold 54,100 67,330 Variable selling expenses 16,000 16,000 Total variable expenses 70,100 83,330 Contribution margin 129,900 116,670 Fixed expenses: Manufacturing overhead 52,000 52,000 Selling and administrative 67,000 67,000 Total fixed expenses 119,000 119,000 10,900 (2,330) Net operating income (loss) *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 Standard Price Standard Cost $2.20 per pound 7.04 Direct materials 3.2 pounds $6.20 per hour Direct labor 0.5 hours 3.10 $1.70 per hour Variable manufacturing overhead 0.4 hours 0.68 10.82 Total standard cost *Based on machine-hours. During June the plant produced 5,000 pools and incurred the following costs a. Purchased 21,000 pounds of materials at a cost of $2.65 per pound. b. Used 15,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 3,100 direct labor-hours at a cost of $5.90 per hour. d. Incurred variable manufacturing overhead cost totaling $4,830 for the month. A total of 2,300 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis