Problem 10-15 (Algo) Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]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 BudgetActualSales (4,000 pools)$ 239,000$ 239,000Variable expenses: Variable cost of goods sold*57,68070,390Variable selling expenses16,00016,000Total variable expenses73,68086,390Contribution margin165,320152,610Fixed expenses: Manufacturing overhead72,00072,000Selling and administrative82,00082,000Total fixed expenses154,000154,000Net operating income (loss)$ 11,320$ (1,390) *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 HoursStandard Price or RateStandard CostDirect materials3.2pounds$ 2.70per pound$ 8.64Direct labor0.6hours$ 7.30per hour4.38Variable manufacturing overhead0.5hours*$ 2.80per hour1.40Total standard cost per unit $ 14.42 *Based on machine-hours. During June, the plant produced 4,000 pools and incurred the following costs:Purchased 17,800 pounds of materials at a cost of $3.15 per pound.Used 12,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)Worked 3,000 direct labor-hours at a cost of $7.00 per hour.Incurred variable manufacturing overhead cost totaling $7,360 for the month. A total of 2,300 machine-hours was recorded.It is the company’s policy to close all variances to cost of goods sold on a monthly basis. Required:1. Compute the following variances for June:a. Materials price and quantity variances.b. Labor rate and efficiency variances.c. Variable overhead rate and efficiency variances. 2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. Required:1. Compute the following variances for June:a. Materials price and quantity variances.b. Labor rate and efficiency variances.c. Variable overhead rate and efficiency variances.2. Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month.Complete this question by entering your answers in the tabs below.Required 1Required 2la. Compute the following variances for June, materials price and quantity variances.1b. Compute the following variances for June, labor rate and efficiency variances.1c. Compute the following variances for June, variable overhead rate and efficiency variances.(Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)Show less A1a. Material price variance1a. Material quantity variance1b. Labor rate variance1b. Labor efficiency variance1c. Variable overhead rate variance1c. Variable overhead efficiency variance< Required 1Required 2> Problem 10-15 (Algo) Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shownby its June contribution format income statement below:FlexibleBudget$ 239,000Actual$ 239,000Sales (4,000 pools)Variable expenses:57,68016,00073,680165,320Variable cost of goods sold*Variable selling expenses70,39016,00086,390152,610Total variable expensesContribution marginFixed expenses:Manufacturing overheadSelling and administrativeTotal fixed expenses72,00082,000154,00072,00082,000154,000Net operating income (loss)$ 11,320$ (1,390)*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:Standard Quantity orStandard Price orStandardHoursRateCost$ 2.70 per pound$ 7.30 per hour$ 2.80 per hourDirect materials3.2 pounds$ 8.64Direct labor0.6 hours4.38Variable manufacturing overhead0.5 hours*1.40Total standard cost per unit$ 14.42*Based on machine-hours.During June, the plant produced 4,000 pools and incurred the following costs:a. Purchased 17,800 pounds of materials at a cost of $3.15 per pound.b. Used 12,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can beignored.)c. Worked 3,000 direct labor-hours at a cost of $7.00 per hour.d. Incurred variable manufacturing overhead cost totaling $7,360 for the month. A total of 2,300 machine-hours was recorded.It is the company's policy to close all variances to cost of goods sold on a monthly basis.

The question is based on the concept of Cost Accounting. 1-a) Material price variance (Actual price - standard price )* AQ purchased (3.15 -2.70)*17,800 8010 U Materials Quantity variance (AQ used - SQ allowed)*Standard price (12,600 -4000*3.2)*2.7 540 F 1-b) Labor rate variance (Actual rate - standard rate)*Actual hours (7 - 7.30)*3000 900 F Labor Efficiency variance (Actual hours - standard hours allowed)* Std rate (3000 - 4000*.6)*7.3 4380 U 1-c) Variable overhead rate variance (Actual rate - standard rate)*Actual machinehours (7,360 - 2300*2.8) 920 U Variable overhead Efficiency variance (Actual hours - standard hours allowed)* Std rate (2300 - 4000*.5)*2.8 840 U 2) Net Variance 12,710 U Material price variance 8,010 U Material quantity variance 540 F labor rate variance 900 F labor efficiecny variance 4380 U variable overhead rate variance 920 U variable overhead efficiency variance 840 U net variance 12,710 U

Business

Accounting

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 (4,000 pools) $ 239,000 $ 239,000 Variable expenses: Variable cost of goods sold* 57,680 70,390 Variable selling expenses 16,000 16,000 Total variable expenses 73,680 86,390 Contribution margin 165,320 152,610 Fixed expenses: Manufacturing overhead 72,000 72,000 Selling and administrative 82,000 82,000 Total fixed expenses 154,000 154,000 Net operating income (loss) $ 11,320 $ (1,390) *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 3.2 pounds $ 2.70 per pound $ 8.64 Direct labor 0.6 hours $ 7.30 per hour 4.38 Variable manufacturing overhead 0.5 hours* $ 2.80 per hour 1.40 Total standard cost per unit $ 14.42 *Based on machine-hours. During June, the plant produced 4,000 pools and incurred the following costs: Purchased 17,800 pounds of materials at a cost of $3.15 per pound. Used 12,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) Worked 3,000 direct labor-hours at a cost of $7.00 per hour. Incurred variable manufacturing overhead cost totaling $7,360 for the month. A total of 2,300 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.

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 (4,000 pools) $ 239,000 $ 239,000 Variable expenses: Variable cost of goods sold* 57,680 70,390 Variable selling expenses 16,000 16,000 Total variable expenses 73,680 86,390 Contribution margin 165,320 152,610 Fixed expenses: Manufacturing overhead 72,000 72,000 Selling and administrative 82,000 82,000 Total fixed expenses 154,000 154,000 Net operating income (loss) $ 11,320 $ (1,390) 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 3.2 pounds $ 2.70 per pound $ 8.64 Direct labor 0.6 hours $ 7.30 per hour 4.38 Variable manufacturing overhead 0.5 hours $ 2.80 per hour 1.40 Total standard cost per unit $ 14.42 *Based on machine-hours. During June, the plant produced 4,000 pools and incurred the following costs: Purchased 17,800 pounds of materials at a cost of $3.15 per pound. Used 12,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) Worked 3,000 direct labor-hours at a cost of $7.00 per hour. Incurred variable manufacturing overhead cost totaling $7,360 for the month. A total of 2,300 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.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 10-15 (Algo) Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]

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 (4,000 pools)	$ 239,000	$ 239,000
Variable expenses:
Variable cost of goods sold*	57,680	70,390
Variable selling expenses	16,000	16,000
Total variable expenses	73,680	86,390
Contribution margin	165,320	152,610
Fixed expenses:
Manufacturing overhead	72,000	72,000
Selling and administrative	82,000	82,000
Total fixed expenses	154,000	154,000
Net operating income (loss)	$ 11,320	$ (1,390)

*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	3.2	pounds	$ 2.70	per pound	$ 8.64
Direct labor	0.6	hours	$ 7.30	per hour	4.38
Variable manufacturing overhead	0.5	hours*	$ 2.80	per hour	1.40
Total standard cost per unit					$ 14.42

*Based on machine-hours.

During June, the plant produced 4,000 pools and incurred the following costs:

Purchased 17,800 pounds of materials at a cost of $3.15 per pound.
Used 12,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
Worked 3,000 direct labor-hours at a cost of $7.00 per hour.
Incurred variable manufacturing overhead cost totaling $7,360 for the month. A total of 2,300 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.

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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
la. 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.)
Show less A
1a. Material price variance
1a. Material quantity variance
1b. Labor rate variance
1b. Labor efficiency variance
1c. Variable overhead rate variance
1c. Variable overhead efficiency variance
< Required 1
Required 2
>

Problem 10-15 (Algo) Comprehensive Variance Analysis [LO10-1, LO10-2, LO10-3]
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
$ 239,000
Actual
$ 239,000
Sales (4,000 pools)
Variable expenses:
57,680
16,000
73,680
165,320
Variable cost of goods sold*
Variable selling expenses
70,390
16,000
86,390
152,610
Total variable expenses
Contribution margin
Fixed expenses:
Manufacturing overhead
Selling and administrative
Total fixed expenses
72,000
82,000
154,000
72,000
82,000
154,000
Net operating income (loss)
$ 11,320
$ (1,390)
*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
Standard Price or
Standard
Hours
Rate
Cost
$ 2.70 per pound
$ 7.30 per hour
$ 2.80 per hour
Direct materials
3.2 pounds
$ 8.64
Direct labor
0.6 hours
4.38
Variable manufacturing overhead
0.5 hours*
1.40
Total standard cost per unit
$ 14.42
*Based on machine-hours.
During June, the plant produced 4,000 pools and incurred the following costs:
a. Purchased 17,800 pounds of materials at a cost of $3.15 per pound.
b. Used 12,600 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 $7.00 per hour.
d. Incurred variable manufacturing overhead cost totaling $7,360 for the month. A total of 2,300 machine-hours was recorded.
It is the company's policy to close all variances to cost of goods sold on a monthly basis.

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.

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