Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. T
ID: 2483455 • 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:
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:
Purchased 19,800 pounds of materials at a cost of $2.55 per pound.
Used 14,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
Incurred variable manufacturing overhead cost totaling $4,940 for the month. A total of 1,900 machine-hours was recorded.
Materials price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Labor rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
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).)
Summarize the variances that you computed in (1) above by showing the net overall favorable or unfavorable variance for the month. (Input all values as positive amounts. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
Pick out the two most significant variances that you computed in (1) above. (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)
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:
Explanation / Answer
Standard Price Standard Standard (Rate) Unit Cost Quantity Direct materials (clay) 3.7 lbs. $ 2.1 per lb. $ 7.77 Direct labor 0.6 hrs. $ 6.7 per hr. 4.02 Variable manufacturing overhead 0.4 hrs. $ 2.2 per hr. 0.88 (based on m/c hours) 0 Fixed manufacturing overhead ($253,000.00 ÷ 115,000.00 units) 0 Actual Results Actual Units Prodcued Actual Qty used Actual Cost Actual Qty/Hr per unit Actual Rate/lb/Hr Std Qty/Hr For Actual Output Std Cost/Actual output Direct materials (clay) 4,000 14,600 37,230 2.55 14,800 31,080 Direct labor 4,000 3,000 19,200 6.40 2,400 16,080 Variable manufacturing overhead 4,000 1,900 4,940 2.600 1,600 3,520 (based on direct labor hours) - 1 Direct Materials Price Variance= Actual Qty Used( Actual Rate-Std Rate) =14600*(2.55-2.1) 6,570 (U) 2 Direct Material Efficiency Variance =Std Rate ( Actual Qty used-Std qty for actual output) =2.1*(14600-14800) 420 (F) 3 Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate) =3000*(6.4-6.7) 900 (F) 4 Direct LAbor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output) =6.7*(3000-2400) 4,020 (U) 5 Variable Overhead Rate Variance= Actual Qty Used( Actual Rate-Std Rate) =1900*(2.6-2.2) 760 (U) 6 Variable Overhead Efficiency Variance =Std Rate ( Actual Qty used-Std qty for actual output) =2.2*(1900-1600) 660 (U) 3 Two Most Significan variances are : Direct Material Price Variance 6,570 U Direct Labor Efficiency variance 4,020 U