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 (6,000 pools) $ 225,000   $ 225,000   Variable expenses:               Variable cost of goods sold*   73,620     88,700   Variable selling expenses   17,000     17,000   Total variable expenses    90,620     105,700   Contribution margin   134,380     119,300   Fixed expenses:             Manufacturing overhead   53,000     53,000   Selling and administrative   68,000     68,000   Total fixed expenses   121,000     121,000   Net operating income (loss) $ 13,380   $ (1,700 )   *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 3.3 pounds $ 2.30 per pound $ 7.59 Direct labor 0.6 hours $ 6.30 per hour   3.78 Variable manufacturing overhead 0.5 hours* $ 1.80 per hour   0.90 Total standard cost per unit         $ 12.27   *Based on machine-hours. During June, the plant produced 6,000 pools and incurred the following costs: Purchased 24,800 pounds of materials at a cost of $2.75 per pound. Used 19,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) Worked 4,200 direct labor-hours at a cost of $6.00 per hour. Incurred variable manufacturing overhead cost totaling $7,260 for the month. A total of 3,300 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.

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Chapter1: Financial Statements And Business Decisions
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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:

 

  Flexible Budget Actual
Sales (6,000 pools) $ 225,000   $ 225,000  
Variable expenses:              
Variable cost of goods sold*   73,620     88,700  
Variable selling expenses  

17,000

    17,000  
Total variable expenses  

 90,620

    105,700  
Contribution margin  

134,380

    119,300  
Fixed expenses:            
Manufacturing overhead   53,000     53,000  
Selling and administrative   68,000     68,000  
Total fixed expenses  

121,000

    121,000  
Net operating income (loss) $ 13,380   $

(1,700

)
 

*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 3.3 pounds $

2.30

per pound $ 7.59
Direct labor 0.6 hours $

6.30

per hour   3.78
Variable manufacturing overhead 0.5 hours* $

1.80

per hour  

0.90

Total standard cost per unit         $ 12.27
 

*Based on machine-hours.

During June, the plant produced 6,000 pools and incurred the following costs:

  1. Purchased 24,800 pounds of materials at a cost of $2.75 per pound.
  2. Used 19,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

  3. Worked 4,200 direct labor-hours at a cost of $6.00 per hour.

  4. Incurred variable manufacturing overhead cost totaling $7,260 for the month. A total of 3,300 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.

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
Material quantity variance
1b. Labor rate variance
Labor efficiency variance
1c. Variable overhead rate variance
Variable overhead efficiency variance
Transcribed Image Text: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 Material quantity variance 1b. Labor rate variance Labor efficiency variance 1c. Variable overhead rate variance Variable overhead efficiency variance
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