Miller Toy Company manufactures a plastic swimming pool at its Westwood Factory. The facility is experiencing issues, as shown in the June contribution format income statement below:

	Flexible Budget		Real
Sales (8,000 pools)	$	290.000		$	290.000
Variable expenses:
Variable cost of goods sold*		104.400			124.770
variable selling expenses		20.000			20.000
Total variable expenses		124.400			144.770
Contribution margin		165.600			145.230
Fixed costs:
Production load		68.000			68.000
Sales and administrative		86.000			86.000
Total fixed expenses		154.000			154.000
Net operating income (loss)	$	11.600		$	(8.770	)

*Includes direct materials, direct labor and variable manufacturing overheads.

Janet Dunn, recently appointed general manager of Westwood Factory, has been instructed to "take control of things". Examining the plant's income statement, Ms. Dunn concluded that the real problem lay in the variable cost of goods sold. He was provided with the following standard cost per swimming pool:

	Standard Quantity or Hour	Standard price or Evaluate			standard cost
Direct materials	3,6 pound	$	2.20	per pound	$	7.92
direct labor	0.5 sec	$	7.70	hourly		3,85
Variable production load	0.4 sec*	$	3.20	hourly		1.28
Total standard cost per unit					$	13.05

*Machine-hour basis.

During the month of June the facility produced 8,000 pools and incurred the following costs:

He purchased 33,800 pounds of material at a cost of $2.65 per pound.

28,600 pounds of material were used in the production. (Inventories of finished goods and semi-finished products are insignificant and can be ignored.)

It worked 4,600 direct labor hours at a cost of $7.40 per hour.

Variable manufacturing overhead cost totaling $12,600 for the month. A total of 3,500 machine hours have been recorded.

It is company policy to cover all differences in cost of goods sold on a monthly basis.

Necessary:

1. Calculate the following variances for the month of June:

A. Material price and quantity differences.

B. Labor rate and productivity variances.

C. Variable overhead rate and productivity variances.

2. Summarize the variances you calculated in (1) above by showing the net overall positive or negative variance for the month.

Answer rating: 100% (QA)

1 A Material price and quantity differences Material Price Variance Actual Price Standard Price x Ac... View the full answer