Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. T
ID: 2334226 • Letter: M
Question
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 Sales (4,000 pools) Variable expenses: 275,000 275,000 Variable cost of goods sold* Vari 90,040 27,000 101,720 117,040 173,280 157,960 74,720 27,000 able selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead 68,000 93,000 161,000 161,000 68,000 93,000 Selling and administrative Total fixed expenses Net operating income (loss) $ 12,280 $ (3,040) 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 Rate Standard Hours Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit 4.3 pounds 0.6 hours 0.3 hours $2.90 per pound $ 8.40 per hour 3.90 per hour $ 12.47 5.04 1.17 18.68 Based on machine-hoursExplanation / Answer
1-a) Material price variance (Actual price - standard price )* AQ purchased (3.35-2.90)*22,200 9990 U Materials Quantity variance (AQ used - SQ allowed)*Standard price (17000 - 4000*4.3)*2.9 580 F 1-b) Labor rate variance (Actual rate - standard rate)*Actual hours (8.10 - 8.40)*3000 900 F Labor Efficiency variance (Actual hours - standard hours allowed)* Std rate (3000 - 4000*.6)*8.4 5040 U 1-c) Variable overhead rate variance (Actual rate - standard rate)*Actual machinehours (6,450 - 1500*3.9) 600 U Variable overhead Efficiency variance (Actual hours - standard hours allowed)* Std rate (1500 - 4000*.3)*3.9 1170 U 2) Net Variance 15,320 U Material price variance 9,990 U Material quantity variance 580 F labor rate variance 900 F labor efficiecny variance 5040 U variable overhead rate variance 600 U variable overhead efficiency variance 1170 U net variance 15,320 U