Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shownby its June contribution format income statement below:FlexibleActualBudget$ 310,000 $ 310,000Sales (7,000 pools)Variable expenses:Variable cost of goods sold*Variable selling expensesTotal variable expenses131,68525,000110,81025,000135,810156,685Contribution marginFixed expenses:Manufacturing overheadSelling and administrativeTotal fixed expenses174,190153,31566,00091,00066,00091,000157,000157,000Net operating income (loss)$ 17,190 $(3,685)*Contains direct materials, direct labor, and variable manufacturing overhead.Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to "get things undercontrol." Upon reviewing the plant's income statement, Ms. Dunn has concluded that the major problem lies in the variable cost ofgoods sold. She has been provided with the following standard cost per swimming pool:StandardStandard PriceStandardQuantity oror RateCostHours$ 11.07$ 2.70 per pound$ 8.20 per hour$ 3.70 per hourDirect materials4.1 poundsDirect labor0.4 hours3.28Variable manufacturing overhead0.4 hours*1.48Total standard cost per unit15.83*Based on machine-hours.During June, the plant produced 7,000 pools and incurred the following costs:a. Purchased 33,700 pounds of materials at a cost of $3.15 per pound.b. Used 28,500 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can beignored.)c. Worked 3,400 direct labor-hours at a cost of $7.90 per hour.d. Incurred variable manufacturing overhead cost totaling $12,710 for the month. A total of 3,100 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.

Solution:-1 Calculation of the variances as follows under:-

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 Actual Budget $ 310,000 $ 310,000 Sales (7,000 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 110,810 25,000 135,810 174,190 131,685 25,000 156,685 153,315 66,000 91,000 157,000 $ 17,190 $ (3,685) 66,000 91,000 157,000 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 Standard Price Standard Quantity or Hours 4.1 pounds 0.4 hours 0.4 hours or Rate $ 2.70 per pound $ 8.20 per hour $ 3.70 per hour Cost $ 11.07 Direct materials Direct labor 3.28 Variable manufacturing overhead Total standard cost per unit 1.48 $ 15.83 Based on machine-hours. During June, the plant produced 7,000 pools and incurred the following costs: a. Purchased 33,700 pounds of materials at a cost of $3.15 per pound. b. Used 28,500 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 3,400 direct labor-hours at a cost of $7.90 per hour. d. Incurred variable manufacturing overhead cost totaling $12,710 for the month. A total of 3,100 machine-hours was recorded. t 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. p. Labor rate and efficiency variances. -. 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.