Problem $9-18($Algo$)$ Comprehensive Variance Analysis $[$LO$9-4,$ LO$9-5,$ LO$9-6]$

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:

Flexible Budget Actual

Sales $(6,000$ pools$)$ $ $265,000$ $ $265,000$

Variable expenses:

Variable cost of goods sold$*95,580112,700$

Variable selling expenses $14,00014,000$

Total variable expenses $109,580126,700$

Contribution margin $155,420138,300$

Fixed expenses:

Manufacturing overhead $63,00063,000$

Selling and administrative $78,00078,000$

Total fixed expenses $141,000141,000$

Net operating income $($loss$)$ $ $14,420$ $ $(2,700)$

$*$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 or Hours Standard Price or Rate Standard Cost

Direct materials $3\mathrm{.}9$ pounds $ $2\mathrm{.}30$ per pound $ $8\mathrm{.}97$

Direct labor $0\mathrm{.}8$ hours $ $6\mathrm{.}90$ per hour $5\mathrm{.}52$

Variable manufacturing overhead $0\mathrm{.}6$ hours$*$ $ $2\mathrm{.}40$ per hour $1\mathrm{.}44$

Total standard cost per unit $ $15\mathrm{.}93$

$*$Based on machine$-$hours.

During June the plant produced $6,000$ pools and incurred the following costs:

Purchased $28,400$ pounds of materials at a cost of $$2\mathrm{.}75$ per pound.

Used $23,200$ pounds of materials in production. $($Finished goods and work in process inventories are insignificant and can be ignored.$)$

Worked $5,400$ direct labor$-$hours at a cost of $$6\mathrm{.}60$ per hour.

Incurred variable manufacturing overhead cost totaling $$10,920$ for the month. A total of $3,900$ machine$-$hours was recorded.

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

Required:

$1.$ 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.

$2.$ Summarize the variances that you computed in $(1)$ above by showing the net overall favorable or unfavorable variance for the month.