Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant is experiencing...

Transcribed Image Text:

Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant is experiencing problems as shown by its June contribution format income statement below: Sales (6,000 pools) Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) Flexible Budget $ 273,000 Actual $ 273,000 102,050 83,460 24,000 24,000 107,460 126,050 165,540 146,950 65,000 65,000 90,000 90,000 155,000 155,000 $ 10,540 $ (8,050) *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 concluded the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit *Based on machine-hours. Standard Quantity or Standard Price or Hours 4.0 pounds 0.3 hours Rate $ 2.60 per pound $ 8.10 per hour 0.3 hours* $ 3.60 per hour Standard Cost $ 10.40 2.43 1.08 $ 13.91 During June, the plant produced 6,000 pools and incurred the following costs: a. Purchased 29,000 pounds of materials at a cost of $3.05 per pound. b. Used 23,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 2,400 direct labor-hours at a cost of $7.80 per hour. d. Incurred variable manufacturing overhead cost totaling $8,400 for the month. A total of 2,100 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. Required: 1. Compute the following variances for June: a. Materials price and quantity variances. b. Labor rate and efficiency variances. c. Variable overhead rate and efficiency variances. 2. Summarize the variances you computed in requirement 1 by showing the net overall favorable or unfavorable variance for the month. Required 1 Required 2 1a. Compute the following variances for June, materials price and quantity variances. 1b. Compute the following variances for June, labor rate and efficiency variances. 1c. Compute the following variances for June, variable overhead rate and efficiency variances. Note: 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). Input all amounts as positive values. 1a. Material price variance 1a. Material quantity variance 1b. Labor rate variance 1b. Labor efficiency variance 1c. Variable overhead rate variance 1c. Variable overhead efficiency variance < Required 1 Required 2 > Show less Required 1 Required 2 Summarize the variances you computed in requirement 1 by showing the net overall favorable or unfavorable variance for the month. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Net variance < Required 1 Required 2 > Show less Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant is experiencing problems as shown by its June contribution format income statement below: Sales (6,000 pools) Variable expenses: Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution margin Fixed expenses: Manufacturing overhead Selling and administrative Total fixed expenses Net operating income (loss) Flexible Budget $ 273,000 Actual $ 273,000 102,050 83,460 24,000 24,000 107,460 126,050 165,540 146,950 65,000 65,000 90,000 90,000 155,000 155,000 $ 10,540 $ (8,050) *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 concluded the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool: Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit *Based on machine-hours. Standard Quantity or Standard Price or Hours 4.0 pounds 0.3 hours Rate $ 2.60 per pound $ 8.10 per hour 0.3 hours* $ 3.60 per hour Standard Cost $ 10.40 2.43 1.08 $ 13.91 During June, the plant produced 6,000 pools and incurred the following costs: a. Purchased 29,000 pounds of materials at a cost of $3.05 per pound. b. Used 23,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c. Worked 2,400 direct labor-hours at a cost of $7.80 per hour. d. Incurred variable manufacturing overhead cost totaling $8,400 for the month. A total of 2,100 machine-hours was recorded. It is the company's policy to close all variances to cost of goods sold on a monthly basis. Required: 1. Compute the following variances for June: a. Materials price and quantity variances. b. Labor rate and efficiency variances. c. Variable overhead rate and efficiency variances. 2. Summarize the variances you computed in requirement 1 by showing the net overall favorable or unfavorable variance for the month. Required 1 Required 2 1a. Compute the following variances for June, materials price and quantity variances. 1b. Compute the following variances for June, labor rate and efficiency variances. 1c. Compute the following variances for June, variable overhead rate and efficiency variances. Note: 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). Input all amounts as positive values. 1a. Material price variance 1a. Material quantity variance 1b. Labor rate variance 1b. Labor efficiency variance 1c. Variable overhead rate variance 1c. Variable overhead efficiency variance < Required 1 Required 2 > Show less Required 1 Required 2 Summarize the variances you computed in requirement 1 by showing the net overall favorable or unfavorable variance for the month. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Net variance < Required 1 Required 2 > Show less