by its June contribution format income statement below: Sales (4,000 pools) Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) Flexible Budget $ 275,000 Actual $ 275,000 74,720 90,040 27,000 27,000 101,720 117,040 173,280 157,960 68,000 68,000 93,000 93,000 161,000 161,000 $ 12,280 $ (3,040) *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: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Hours Standard Price or Rate 4.3 pounds 0.6 hours $ 2.90 per pound $ 8.40 per hour 0.3 hours* $ 3.90 per hour Standard Cost $ 12.47 5.04 1.17 $ 18.68 *Based on machine-hours. During June the plant produced 4,000 pools and incurred the following costs: a. Purchased 22,200 pounds of materials at a cost of $3.35 per pound. b. Used 17,000 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 3,000 direct labor-hours at a cost of $8.10 per hour. d. Incurred variable manufacturing overhead cost totaling $6,450 for the month. A total of 1,500 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. Materials price and quantity variances. b. Labor rate and efficiency variances. c. Variable overhead rate and efficiency variances. 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month.
by its June contribution format income statement below: Sales (4,000 pools) Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) Flexible Budget $ 275,000 Actual $ 275,000 74,720 90,040 27,000 27,000 101,720 117,040 173,280 157,960 68,000 68,000 93,000 93,000 161,000 161,000 $ 12,280 $ (3,040) *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: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Hours Standard Price or Rate 4.3 pounds 0.6 hours $ 2.90 per pound $ 8.40 per hour 0.3 hours* $ 3.90 per hour Standard Cost $ 12.47 5.04 1.17 $ 18.68 *Based on machine-hours. During June the plant produced 4,000 pools and incurred the following costs: a. Purchased 22,200 pounds of materials at a cost of $3.35 per pound. b. Used 17,000 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 3,000 direct labor-hours at a cost of $8.10 per hour. d. Incurred variable manufacturing overhead cost totaling $6,450 for the month. A total of 1,500 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. Materials price and quantity variances. b. Labor rate and efficiency variances. c. Variable overhead rate and efficiency variances. 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:by its June contribution format income statement below:
Sales (4,000 pools)
Variable expenses:
Variable cost of goods sold*
Variable selling expenses
Total variable expenses
Contribution margin
Fixed expenses:
Manufacturing overhead
Selling and administrative
Total fixed expenses
Net operating income (loss)
Flexible
Budget
$ 275,000
Actual
$ 275,000
74,720
90,040
27,000
27,000
101,720
117,040
173,280
157,960
68,000
68,000
93,000
93,000
161,000
161,000
$ 12,280
$ (3,040)
*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:
Direct materials
Direct labor
Variable manufacturing overhead
Total standard cost per unit
Standard
Quantity or
Hours
Standard Price or Rate
4.3 pounds
0.6 hours
$ 2.90 per pound
$ 8.40 per hour
0.3 hours*
$ 3.90 per hour
Standard
Cost
$ 12.47
5.04
1.17
$ 18.68
*Based on machine-hours.
During June the plant produced 4,000 pools and incurred the following costs:
a. Purchased 22,200 pounds of materials at a cost of $3.35 per pound.
b. Used 17,000 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be
ignored.)
c. Worked 3,000 direct labor-hours at a cost of $8.10 per hour.
d. Incurred variable manufacturing overhead cost totaling $6,450 for the month. A total of 1,500 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. Materials price and quantity variances.
b. Labor rate and efficiency variances.
c. Variable overhead rate and efficiency variances.
2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month.
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