Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. T
ID: 2586595 • 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 25,400 pounds of materials at a cost of $2.45 per pound.
Used 20,200 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
Incurred variable manufacturing overhead cost totaling $5,100 for the month. A total of 1,500 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).)
B.) 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).)
2.) 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
1. a) material price variance = (standard rate - actual rate)actual quantity purchased
= (2 - 2.45) 25400
= 11430 unfav.
material quantity variance = (standard quantity - actual quantity used) standard rate
= (3.4*6000 - 20200) *2
= 400 fav.
b) labour rate variance = (stndard rate - actual rate) actual hours
= (7.5 - 7.2)2400
= 720 fav.
labour efficiency variance = (standard hours - actual hours) standard rate
= (0.3*6000 - 2400) 7.5
= 4500 unfav.
c) variable overhead rate variance = (standard rate - actual rate) actual hours
= (3 - (5100/1500) ) 1500
= 600 unfav.
variable efficiency variance = (standard hours - actual hours) standard rate
= (1200 - 1500) 3
= 900 unfav.
2. summary of variance :
3. two most significant variance :
1. material price variance - 11430 U
2. labour efficiency variance - 4500 U
material price variance 11430 u material quantity variance 400 f labour rate variance 720 f labour efficiency variance 4500 u variable overhead rate variance 600 u variable overhead efficiency variance 900 u net variance 16310 U