Required: 1. Compute the following varlances for June: a. Materials price and quantity variances. b. Labor rate and efficiency varlances. c. Variable overhead rate and efficiency varlances.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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
$ 250, 000 $250, 000
Sales (3,000 pools)
Variable expenses:
Variable cost of goods sold
Variable selling expenses
Total variable expenses
Contribution margin
67,000
53,430
26,000
79,430
170, 570
26,000
93,000
157,000
Fixed expenses:
Manufacturing overhead
Selling and administrative
Total fixed expenses
Net operating income (loss)
67,000
92,000
159,000
$ 11,570 S (2,000)
67,800
92, e00
159,000
"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 liles in the variable cost of
goods sold. She has been provided with the following standard cost per swimming pool:
Standard
Quantity or
Hours
4.2 pounds
0.5 hours
0.5 hours
Standard
Cost
$ 11.76
4.15
Standard Price
or Rate
$2.80 per pound
$ 8.30 per hour
$3.80 per hour
Direct materials
Direct labor
1.90
Variable manufacturing overhead
Total standard cost per unit
$ 17.81
"Based on machine-hours.
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. Flexible Budget Actual $ 250, 000 $250, 000 Sales (3,000 pools) Variable expenses: Variable cost of goods sold Variable selling expenses Total variable expenses Contribution margin 67,000 53,430 26,000 79,430 170, 570 26,000 93,000 157,000 Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) 67,000 92,000 159,000 $ 11,570 S (2,000) 67,800 92, e00 159,000 "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 liles in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool: Standard Quantity or Hours 4.2 pounds 0.5 hours 0.5 hours Standard Cost $ 11.76 4.15 Standard Price or Rate $2.80 per pound $ 8.30 per hour $3.80 per hour Direct materials Direct labor 1.90 Variable manufacturing overhead Total standard cost per unit $ 17.81 "Based on machine-hours.
During June the plant produced 3,000 pools and incurred the following costs:
a. Purchased 17,600 pounds of materials at a cost of $3.25 per pound.
b. Used 12,400 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be
ignored.)
c. Worked 2,100 direct labor-hours at a cost of $8.00 per hour.
d. Incurred variable manufacturing overhead cost totaling $7,560 for the month. A total of 1,800 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 varlances for June:
a. Materials price and quantity varlances.
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
Transcribed Image Text:During June the plant produced 3,000 pools and incurred the following costs: a. Purchased 17,600 pounds of materials at a cost of $3.25 per pound. b. Used 12,400 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 2,100 direct labor-hours at a cost of $8.00 per hour. d. Incurred variable manufacturing overhead cost totaling $7,560 for the month. A total of 1,800 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 varlances for June: a. Materials price and quantity varlances. 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
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