Question

Problem 10-15 Comprehensive Variance Analysis (L010-1, LO10-2, LO10-3] 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 Actual Budget $ 210,000 $ 210,000 Sales (4,000 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) 50,680 12,000 62,680 147,320 63,710 12.000 75, 710 134,290 61,000 76,000 137,000 10,320 $ 61,000 76,000 137,000 (2,710) $ * 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 Hours 3.7 pounds 0.6 hours 0.4 hours* Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Price or Rate $ 2.10 per pound $ 6.70 per hour $ 2.20 per hour Standard Cost $ 7.77 4.02 0.88 $ 12.67

Answer 1

solution @ computation variances of material price and Quantity material Price variances = AQ(AP-SP) - 14.600( 2.5502.10) = $6.9 to unfavourable material quantity variance - SRL AQ-SQ) - 9.10 (14,600 - (4,000x3.4) - 2.10(14.600- 14.800) = 2.101-200) = -420 = - 420 favourable 6 computation of labour rate and efficiency variance Labour rate variance = AHCAR-SR) - 3.000(6.40€) 6.70) = 3.000X -0.3 = -900 favourable

Labour efficiency variance - SR (AH-SH) = 6.40 (3,000 - (1.000 x0-6)) = 6.70(3.000 - 2000) = 6. to (60o) - 4020 unfavourable computation of variable overhead rate and efficiency variance variable over head rale variance = Actual lost - LAMHXSRY = $4.940 - $900 brX9.20 = 4,900 (-) 4,180 = 760 unfavourable efficiency variance SR(Actual machine HY - Stard. machine by - Rºo( 1900 -(4, OOO ko 1 )) - 9.2011900 - 1600) - 2201 300) = 660 unfavourable

② computation of net variance = 6570U-420F-900 F tuosou+7600 7660 5 10.690 un favourable