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 $ 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 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. It is the company’s policy to close all variances to cost of goods sold on a monthly basis. Compute the following variances for June: Materials price and quantity variances. Labor rate and efficiency variances. Variable overhead rate and efficiency variances. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. What impact did this figure have on the company’s income statement? Show computations. Pick out the two most significant variances that you computed in (1) above. Explain to Ms. Dunn possible causes of these variances.
|
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 |
$ |
|
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 |
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.
It is the company’s policy to close all variances to cost of goods sold on a monthly basis.
-
Compute the following variances for June:
-
Materials price and quantity variances.
-
Labor rate and efficiency variances.
-
Variable overhead rate and efficiency variances.
-
-
Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. What impact did this figure have on the company’s income statement? Show computations.
-
Pick out the two most significant variances that you computed in (1) above. Explain to Ms. Dunn possible causes of these variances.
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