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 $(8,000$ pools$)$ $ $265,000$ $ $265,000$

Variable expenses:

Variable cost of goods sold$*88,960106,490$

Variable selling expenses $16,00016,000$

Total variable expenses $104,960122,490$

Contribution margin $160,040142,510$

Fixed expenses:

Manufacturing overhead $65,00065,000$

Selling and administrative $80,00080,000$

Total fixed expenses $145,000145,000$

Net operating income $($loss$)$ $ $15,040$ $ $(2,490)$

$*$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 $3\mathrm{.}0$ pounds $ $2\mathrm{.}50$ per pound $ $7\mathrm{.}50$

Direct labor $0\mathrm{.}4$ hours $ $7\mathrm{.}10$ per hour $2\mathrm{.}84$

Variable manufacturing overhead $0\mathrm{.}3$ hours$*$ $ $2\mathrm{.}60$ per hour $0\mathrm{.}78$

Total standard cost per unit $ $11\mathrm{.}12$

$*$Based on machine$-$hours.

During June the plant produced $8,000$ pools and incurred the following costs:

Purchased $29,000$ pounds of materials at a cost of $$2\mathrm{.}95$ per pound.

Used $23,800$ pounds of materials in production. $($Finished goods and work in process inventories are insignificant and can be ignored.$)$

Worked $3,800$ direct labor$-$hours at a cost of $$6\mathrm{.}80$ per hour.

Incurred variable manufacturing overhead cost totaling $$8,100$ for the month. A total of $2,700$ 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.