Toy Company manufactures a plastic swimming pool at its Plant. The standard cost for one pool is as follows:

Standard Quantity or HoursStandard Price or RateStandard

CostDirect materials1.40kilograms$5.00per kilogram$7.00Direct labour0.80hours$6.00per hour4.80Variable manufacturing overhead0.50machine-hours$4.00per machine-hour2.00Total standard cost$13.80

The plant has been experiencing problems for some time, as is shown by its June income statement when it made and sold 15,000 pools; the normal volume is 15,150 pools per month. Fixed costs are allocated using machine-hours.

Flexible BudgetedActualSales (15,000 pools)$450,000$450,000Less: Variable expenses:Variable cost of goods sold*207,000209,990Variable selling expenses20,00020,000Total variable expenses227,000229,990Contribution margin223,000220,010Less: Fixed expenses:Manufacturing overhead100,000100,000Selling and administrative84,00084,000Total fixed expenses184,000184,000Net income$39,000$36,010

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

Janet Dunn, the general manager of the Westwood Plant, wants to get things under control. She needs information about the operations in June since the income statement signalled that the problem could be due to the variable cost of goods sold. Dunn learns the following about operations and costs in June:

1. 31,600 kilograms of materials were purchased at a cost of $4.00 per kilogram.
2. 24,600 kilograms of materials were used in production. (Finished goods and work-in-process inventories are insignificant and can be ignored.)
3. 11,800 direct labour-hours were worked at a cost of $8 per hour.
4. Variable manufacturing overhead cost totalling $24,190 for the month was incurred. A total of 5,900 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.Direct materials price and quantity variances.(Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Material price variance Material quantity variance

b.Direct labour rate and efficiency variances.(Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Labour rate varianceLabour efficiency variance

c.Variable overhead spending and efficiency variances.(Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Variable overhead spending varianceVariable overhead efficiency variance

2-a.Summarize the variances you computed in part (1) by showing the net overall favourable or unfavourable variance for the month.(Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Net variance

2-b.What impact did this figure have on the company's income statement?

This will cause the Cost of Goods Sold to, therebynet income by that amount.

3.Pick out the two most significant variances you computed in part (1).(You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

check all that apply

• Materials price variance
• Materials quantity varianceunanswered
• Labour rate varianceunanswered
• Variable overhead efficiency varianceunanswered
• Variable overhead spending varianceunanswered
• Labour efficiency varianceunanswered

4.Compute the fixed overhead cost variances.(Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Fixed overhead budget varianceFixed overhead volume variance