value: 2.68 points Michiana Company's Benton Harbor Plant produces precast ingots for industrial use. Angelo Lorenzo, who was recently appointed general manager of the Benton Harbor Plant, has just been handed the plants contribution format income statement for October. The statement is shown below: Sales (5,000 ingots) $200,000 $200,000 Variable expenses: Variable cost of goods sold Variable selling expenses 54,10067,330 16,00016,000 70,100 83,330 129,900 116,670 Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative 52,00052,000 67,000 119,000 119,000 s 10,900 (2,330) Total fixed expenses Net operating income (loss) Contains direct materials, direct labor, and variable manufacturing overhead. Mr. Lorenzo was shocked to see the loss for the month, particularly because sales were exactly as budgeted. He stated, "I sure hope the plant has a standard cost system in operation. If it doesn't, I won't have the slightest idea of where to start looking for the problem." The plant does use a standard cost system, with the following standard variable cost per ingot Standard Quantity Standard Price Standard or Hours or Rate Cost Direct materials Direct labor Variable manufacturing overhead 0.4 hours$1.70 per hour 3.2 pounds 0.5 hours $2.20 per pound $6.20 per hour $ 7.04 3.10 0.68 Total standard variable cost $10.82