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

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

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 26BEB: Variable Cost Ratio, Contribution Margin Ratio Chillmax Company plans to sell 3,500 pairs of shoes...

See similar textbooks

Related questions

Concept explainers

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:

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

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.