Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. T
ID: 2566642 • 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 Budget Actual Sales (7,000 pools) Variable expenses: $ 255,000 $ 255,000 Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margir Fixed expenses: 85,400 104,590 15,000 100,400 119,590 154,600 135,410 15,000 Manufacturing overhead 64,000 79,000 143,000 143,000 64,000 79,000 Selling and administrative Total fixed expenses Net operating income (loss) $ 11,600 $ (7,590) 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 Standard Cost or Rate Hours Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit 4.0 pounds 0.3 hours 0.2 hours* $ 2.40 per pound $ 7.00 per hour 5 2.50 per hour $ 9.60 2.10 0.50 12.20Explanation / Answer
Materials price variance (AP - SP)* AQ purchased (2.85- 2.40)*33000 14850 U Material Quantity variance (AQ used - Sqallowed)*SR (27,800 - 7000*4)*2.40 480 F labor rate variance (AR - SR)*ah (6.70 - 7)*2700 810 F labor Efficiency variance (AH - SH)*SR (2700 - 7000*.3)*7 4200 U Variable overhead rate variance (AR - SR)*actual MH (2.90 - 2.50)*1700 680 U Variable overhead Efficiency varinace (MH - Standard MH allowed)*SR (1700 - 7000*.2)*2.50 750 U Net variance 19,190 U