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 Actual Budget $175,000 $175,000 Sales (3,000 pools) Variable expenses: Variable cost of goods sold Variable selling expenses 58,310 10,000 68,310 106,690 24,300 10,000 34,300 140,700 Total variable expenses Contribution margin Fixed expenses Manufacturing overhead Selling and administrative Total fixed expenses 50,000 65,000 65,000 115,000 115,000 $ 25,700 (8,310) 50,000 Net operating income (1oss) "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 Standard Price Cost or Rate Hours $2.00 per pound $ 6.00 per hour $ 1.50 per hour $ 6.00 1.80 0.30 Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit 3.0 pounds 0.3 hours 0.2 hours $ 8.10 Based on machine-hours During June, the plant produced 3,000 pools and incurred the following costs a. Purchased 23,000 pounds of materials at a cost of $3.20 per pound. b. Used 8,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.) c.Worked 2,000 direct labor-hours at a cost of $5.70 per hour d. Incurred variable manufacturing overhead cost totaling $1,710 for the month. A total of 900 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 that you computed in () above by showing the net overall favorable or unfavorable variance for the month. Complete this question by entering your answers in the tabs below.

Answer 1

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Miller Toy Company	Finished Units	Input per unit	Input required	Rate per unit	Amount
Answer 1 a
Direct Material Variance
Standard Price allowed for Actual Output at Standard Price	3,000.00	3.00	9,000.00	2.00	18,000.00	A
Actual Quantity of Input used at Standard Price			8,800.00	2.00	17,600.00	B 1
Quantity Variance (B 1-A)					(400.00)	Favorable
Actual Quantity of materials purchased at Standard Price			23,000.00	2.00	46,000.00	B 2
Actual cost of materials			23,000.00	3.20	73,600.00	C
Price Variance (C-B 2)					27,600.00	Unfavorable
Total Material Variance					27,200.00	Unfavorable
Answer 1 b
Direct Labor Variance
Standard Hours allowed for Actual Output at Standard Rate	3,000.00	0.30	900.00	6.00	5,400.00	D
Actual Hours of Input, at Standard Rate			2,000.00	6.00	12,000.00	E
Actual Hours of Input, at Actual Rate			2,000.00	5.70	11,400.00	F
Efficiency Variance (E-D)					6,600.00	Unfavorable
Price Variance (F-E)					(600.00)	Favorable
Total Labor Variance (F-D)					6,000.00	Unfavorable
Answer 1 c
Variable Overhead Variance
Standard Hours allowed for Actual Output at Standard Rate	3,000.00	0.20	600.00	1.50	900.00	G
Actual Hours of Input, at Standard Rate			900.00	1.50	1,350.00	H
Actual Hours of Input, at Actual Rate					1,710.00	I
Variable overhead efficiency variance (H-G)					450.00	Unfavorable
Variable overhead Spending variance (I-H)					360.00	Unfavorable
Total Variable overhead variance (I-G)					810.00	Unfavorable
Answer 2
Total variance					Amount $
Total Material Variance					27,200.00	Unfavorable
Total Labor Variance					6,000.00	Unfavorable
Total Variable overhead variance					810.00	Unfavorable
Total variance for the month					34,010.00	Unfavorable