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Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as show by its June contribution format income statement below: Sales (8,000 pools) Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Flexible. Budget $ 240,000 Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit *Based on machine-hours. 94,000 10,000 104,000 136,000 Actual $ 240,000 112,470 10,000 122,470 117,530 55,000 55,000 70,000 70,000 125,000 125,000 $ 11,000 $ (7,470) Total fixed expenses Net operating income (loss) *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 3.5 pounds 0.4 hours 0.2 hours* Standard Price or Rate $ 2.50 per pound $ 6.50 per hour $ 2.00 per hour Standard Cost $ 8.75 2.60 0.40 $11.75

Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as show by its June contribution format income statement below: Sales (8,000 pools) Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Flexible. Budget $ 240,000 Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit *Based on machine-hours. 94,000 10,000 104,000 136,000 Actual $ 240,000 112,470 10,000 122,470 117,530 55,000 55,000 70,000 70,000 125,000 125,000 $ 11,000 $ (7,470) Total fixed expenses Net operating income (loss) *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 3.5 pounds 0.4 hours 0.2 hours* Standard Price or Rate $ 2.50 per pound $ 6.50 per hour $ 2.00 per hour Standard Cost $ 8.75 2.60 0.40 $11.75

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: Sales (8,000 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) Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Flexible Budget $ 240,000 *Based on machine-hours. 94,000 10,000 104,000 136,000 55,000 70,000 125,000 $ 11,000 Actual $ 240,000 *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 3.5 pounds 0.4 hours 0.2 hours* 112,470 10,000 122,470 117,530 55,000 70,000 125,000 $ (7,470) Standard Price or Rate $ 2.50 per pound $ 6.50 per hour $ 2.00 per hour Standard Cost $ 8.75 2.60 0.40 $11.75
Transcribed Image Text: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: Sales (8,000 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) Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Flexible Budget $ 240,000 *Based on machine-hours. 94,000 10,000 104,000 136,000 55,000 70,000 125,000 $ 11,000 Actual $ 240,000 *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 3.5 pounds 0.4 hours 0.2 hours* 112,470 10,000 122,470 117,530 55,000 70,000 125,000 $ (7,470) Standard Price or Rate $ 2.50 per pound $ 6.50 per hour $ 2.00 per hour Standard Cost $ 8.75 2.60 0.40 $11.75
*Based on machine-hours. During June, the plant produced 8,000 pools and incurred the following costs: a. Purchased 33,000 pounds of materials at a cost of $2.95 per pound. b. Used 27,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 3,800 direct labor-hours at a cost of $6.20 per hour. d. Incurred variable manufacturing overhead cost totaling $4,560 for the month. A total of 1,900 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 requirement 1 by showing the net overall favorable or unfavorable variance for the month. Complete this question by entering your answers in the tabs below. Required 1 Required 2 1a. Compute the following variances for June, materials price and quantity variances. 1b. Compute the following variances for June. labor rate and efficiency variances.
Transcribed Image Text:*Based on machine-hours. During June, the plant produced 8,000 pools and incurred the following costs: a. Purchased 33,000 pounds of materials at a cost of $2.95 per pound. b. Used 27,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 3,800 direct labor-hours at a cost of $6.20 per hour. d. Incurred variable manufacturing overhead cost totaling $4,560 for the month. A total of 1,900 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 requirement 1 by showing the net overall favorable or unfavorable variance for the month. Complete this question by entering your answers in the tabs below. Required 1 Required 2 1a. Compute the following variances for June, materials price and quantity variances. 1b. Compute the following variances for June. labor rate and efficiency variances.
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