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 (15,000 pools) $ 675,000   $ 675,000   Variable expenses:               Variable cost of goods sold*   435,000     461,890   Variable selling expenses   20,000     20,000   Total variable expenses   455,000     481,890   Contribution margin   220,000     193,110   Fixed expenses:             Manufacturing overhead   130,000     130,000   Selling and administrative   84,000     84,000   Total fixed expenses   214,000     214,000   Net operating income (loss) $ 6,000   $ (20,890 )   *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 Priceor Rate Standard Cost Direct materials 3.0 pounds $ 5.00 per pound $ 15.00 Direct labor 0.8 hours $ 16.00 per hour   12.80 Variable manufacturing overhead 0.4 hours* $ 3.00 per hour   1.20 Total standard cost per unit         $ 29.00   *Based on machine-hours.   During June the plant produced 15,000 pools and incurred the following costs:   Purchased 60,000 pounds of materials at a cost of $4.95 per pound. Used 49,200 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) Worked 11,800 direct labor-hours at a cost of $17.00 per hour. Incurred variable manufacturing overhead cost totaling $18,290 for the month. A total of 5,900 machine-hours was recorded.   1a. Compute the following variances for June, materials price and quantity variances. 1b. Compute the following variances for June, labor rate and efficiency variances. 1c. Compute the following variances for June, variable overhead rate and efficiency variances. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Material price variance   F,U,N Material quantity variance   F,U,N Labor rate variance   F,U,N Labor efficiency variance   F,U,N Variable overhead rate variance   F,U,N Variable overhead efficiency variance   F,U,N     net variance   F,U,N

Question

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 (15,000 pools) $ 675,000   $ 675,000  
Variable expenses:              
Variable cost of goods sold*   435,000     461,890  
Variable selling expenses   20,000     20,000  
Total variable expenses   455,000     481,890  
Contribution margin   220,000     193,110  
Fixed expenses:            
Manufacturing overhead   130,000     130,000  
Selling and administrative   84,000     84,000  
Total fixed expenses   214,000     214,000  
Net operating income (loss) $ 6,000   $ (20,890 )
 

*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 3.0 pounds $ 5.00 per pound $ 15.00
Direct labor 0.8 hours $ 16.00 per hour   12.80
Variable manufacturing overhead 0.4 hours* $ 3.00 per hour   1.20
Total standard cost per unit         $ 29.00
 

*Based on machine-hours.

 

During June the plant produced 15,000 pools and incurred the following costs:

 

  1. Purchased 60,000 pounds of materials at a cost of $4.95 per pound.
  2. Used 49,200 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
  3. Worked 11,800 direct labor-hours at a cost of $17.00 per hour.
  4. Incurred variable manufacturing overhead cost totaling $18,290 for the month. A total of 5,900 machine-hours was recorded.

 

1a. Compute the following variances for June, materials price and quantity variances.

1b. Compute the following variances for June, labor rate and efficiency variances.

1c. Compute the following variances for June, variable overhead rate and efficiency variances.

(Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Material price variance   F,U,N
Material quantity variance   F,U,N
Labor rate variance   F,U,N
Labor efficiency variance   F,U,N
Variable overhead rate variance   F,U,N
Variable overhead efficiency variance   F,U,N

 

 

net variance   F,U,N

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