Problem 8-18A Comprehensive Variance Analysis LO8-4, LO8-5, L08-6 Miller Toy Com

Question

Problem 8-18A Comprehensive Variance Analysis LO8-4, LO8-5, L08-6 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 Sales (4,000 pools) $ 180,000 $180,000 Variable expenses Variable cost of goods sold37,72049,210 Variable selling expenses Total variable expenses Contribution margin Fixed expenses: 15,00015,000 52,720 64,210 127,280115,790 Manufacturing overhead Selling and administrative 51,000 51,000 66,000 66,000 117,000 117.000 S 10.280 (1210) Total fixed expenses 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 Quantity Standard PriceStandard or Rate Cost Direct materials Direct labor Variable manufacturing overhead or Hours 3 1 pounds 0. 4 hours 2.10 per poundS $6.10 per hour $1.60 per hour 651 2.44 0 48 0 3 hours" $ 943 Total standard cost

Explanation / Answer

a) Material price variance = (2.10-2.55)*17400 = 7830 U

Material quantity variance = (4000*3.1-12200)*2.10 = 420 F

b) Labour rate variance = (6.10-5.80)*2200 = 660 F

Labour efficiency variance = (4000*0.4-2200)*6.1 = 3660 U

c) Variable overhead rate variance = (1.6*1500-3000) = 600 U

Variable overhead efficiency variance = (4000*.3-1500)*1.6 = 480 U

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