Problem $9-18$ 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 $(7,000$ pools$)$ $ $310,000$ $ $310,000$

Variable expenses:

Variable cost of goods sold$*110,810131,685$

Variable selling expenses

$25,000$

$25,000$

Total variable expenses

$135,810$

$156,685$

Contribution margin

$174,190$

$153,315$

Fixed expenses:

Manufacturing overhead $66,00066,000$

Selling and administrative $91,00091,000$

Total fixed expenses

$157,000$

$157,000$

Net operating income $($loss$)$ $ $17,190$ $

$(3,685$

$)$

$*$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 $4\mathrm{.}1$ pounds $

$2\mathrm{.}70$

per pound $ $11\mathrm{.}07$

Direct labor $0\mathrm{.}4$ hours $

$8\mathrm{.}20$

per hour $3\mathrm{.}28$

Variable manufacturing overhead $0\mathrm{.}4$ hours$*$ $

$3\mathrm{.}70$

per hour

$1\mathrm{.}48$

Total standard cost per unit $ $15\mathrm{.}83$

$*$Based on machine$-$hours.

During June the plant produced $7,000$ pools and incurred the following costs:

Purchased $33,700$ pounds of materials at a cost of $$3\mathrm{.}15$ per pound.

Used $28,500$ pounds of materials in production. $($Finished goods and work in process inventories are insignificant and can be ignored.$)$

Worked $3,400$ direct labor$-$hours at a cost of $$7\mathrm{.}90$ per hour.

Incurred variable manufacturing overhead cost totaling $$12,710$ for the month. A total of $3,100$ 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.