Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. T
ID: 2472336 • 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: Budgeted Actual $210,000 $210,000 Sales (3,000 pools) Variable expenses Variable cost of goods sold 38,220 49,235 Variable selling expenses Total variable expenses Contribution margin Fixed expenses 15,000 5,000 64,235 156,780 45,765 53,220 Manufacturing overhead Selling and administrative 66,000 66,000 81,000 81,000 147,000 147,000 $ 9,780 $ (1,235) 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 ma following standard cost per swimming pool jor problem lies in the variable cost of goods sold. She has been provided with the Standard Price or Rate $2.60 per pound $7.20 per hour $2.70 per hour Standard Quantity Standard or Hours 3.1 pounds 0.5 hours 0.4 hours* Cost Direct materials Direct labor Variable manufacturing overhead 8.06 3.60 1.08 Total standard cost 12.74 Based on machine-hours.Explanation / Answer
Standard cost Estimate per unit Details Qtylb/Hr Rate Amt $ Per unit Direct Materials 3.10 2.60 8.06 Direct Labor 0.50 7.20 3.60 Variable Manufacturing OH based on M/C Hrs 0.40 2.70 1.08 Total Unit Std cost $ 12.74 Actual Cost details Actual Units Actual Qty lb/Hrs Actual Amt Actual RAte/lb/Hr per unit Direct Materials 3,000 9,100 27,755 3.05 Direct Labor 3,000 2,100 14,490 6.90 Variable Manufacturing OH based on M/C Hrs 3,000 1,500 4,650 3.10 Total Actual cost per unit 46,895 Actual Units std Qty /Hr for actual output Direct Materials 3,000 9,300 Direct Labor 3,000 1,500 Overhead 3,000 1,200 Direct Materials Price Variance= Actual Qty Used( Actual Rate-Std Rate) =9100*(3.05-2.60) 4,095 (U) Direct Material Efficiency Variance =Std Rate ( Actual Qty used-Std qty for actual output) =2.60*(9100-9300) 520 (F) Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate) =2100*(6.9-7.2) 630 (F) Direct LAbor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output) =7.2*(2100-1500) 4,320 (U) Variable Overhead Rate Variance= Actual M/C hrs Used( Actual Rate-Std Rate) =1500*(3.1-2.7) 600 (U) Variable Overhead Efficiency Variance =Std Rate ( Actual M/C Hrs-Std M/C Hrs for actual output) =2.7*(1500-1200) 810 (U) Types of Variance Amt $ F/U Material Price Variance 4,095 U Material Efficiency Variance 520 F Labor Rate Variance 630 F Labor Efficiency Variance 4,320 U Variable OH rate Variance 600 U Variable OH Efficiency Variance 810 U Total Variance 8,675 U