Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. T
ID: 2558970 • 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: Plexible Budget Actual Sales (5,000 pools) Variable expensess $235 000 $235,000 Variable cost of goods sold* 71,350 86,370 Variable selling expensers Total variable expensen Contribution margin Pixed expensess 13,00013,000 84.350 99,370 150,650 135,630 Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (los8) 62,000 62,000 77,000 77,000 139.000139,000 s 11,650(3,370) 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 mejor problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool: standard Standard Price Standard Hour or Rate Coat Direct naterials Direet labor Variable manufacturing overhead Total standard cost per unie B pound. 0.7 hour $ 2.20 per pound s 6.80 per hour S .36 4-76 0.5 hours. 2.30 per hour- 1.15 14.27 Based on machine-hours ?Prev 2 of 4 ::: Next >Explanation / Answer
Material price variance =AQ purchased [AR-SR]
= 24000 [ 2.65- 2.2]
= 10800 U
Material quantity variance =SR[AQ-SQ]
2.2 [18800-(5000*3.8)]
2.2[18800-19000]
- 440 F [enter as 440]
Labor r ate variance = AH[AR-SR]
= 4100 [6.5- 6.8]
= -1230 F [enter as 1230]
Labor efficiency variance =SR[AH-SH]
6.8[4100 -- (5000*.7)]
6.8[4100-3500]
4080 U
Variable overhead rate variance = AMH[AR-SR]
=7560 - [2800*2.3]
= 7560 - 6440
= 1120 U
Variable overhead efficiency variance = SR[AH-SH]
2.3 [2800 - (5000*.5)]
2.3[2800-2500]
690 U
2)
Material price variance 10800 U Material quantity variance 440 F Labor r ate variance 1230F Labor efficiency variancE 4080 U Variable overhead rate variance 1120U Variable overhead efficiency variance 690 U Total variance 15020 U