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. Check my work Flexible Budget Actual $250,000 $250,000 Sales (3,000 pools) Variable expenses Variable cost of goods solde Variable selling expenses Total variable expenses Contribution margin Fixed expenses Manufacturing overhead Selling and administrative Total fixed expenses Not operating income (los) 53,430 26,000 79,430 170,570 67,000 25,000 93,000 157,000 67,000 67.000 92,000 92,000 159.000 159.000 $ 11,570 $ (2.000) *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 Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit Standard Quantity or Hours 4.2 pounds 0.5 hours 0.5 hours Standard Price or Rate 2.30 per pound $8.30 per hour $ 3.80 per hour Standard Cost $11.76 4.15 1.90 $17.81

Answer 1

Answer with detailed working is given below

1 a) Direct Material Variances Direct Material Price Variance $5,580 Unfavourable | Direct Material Quantity Variance $560 Favourable Direct Material Price Variance = ( Standard Rate - Actual Rate) * Actual Quantity Direct Material Quantity Variance = ( Standard Quantity for Actual production - Actual Quantity) * Standard Rate Working note Actual price Actual Quantity Actual Rate Actual Quantity Standard Rate Standard cost Standard Quantity Standard Rate 12,400 Actual Quantity at Actual Rate $3.25 12,400 $40,300 Actual Qty at Standard rate $2.80 12,600 $34,720 Standard Qty at Std rate $2.80 $35,280 Direct Material price variance Direct Material Quantity variance $560 $5,580 Unfavourable Favourable Total Direct Material cost Variance $5,020 Unfavourable 1 b) Direct Labor Variance Direct Labor Rate Variance | $630 Favourable Direct Labor Efficiency Variance $4,980 Unfavourable Direct Labor Rate Variance = ( Standard Rate - Actual Rate) * Actual hours Direct Labor Efficiency Variance = (Standard hours for Actual production - Actual hours) * Standard Rate Working note Actual price Actual Rate Actual Hours Standard Rate Standard cost Standard 1 hours Standard Rate Actual Hours 2,100 Actual labor hours at actual rate $8.000 2,100 $16,800 Actual labor hours at std rate $8.30 1,500 $17,430 Standard hours at std rate $8.30 $12,450 Direct Labor Rate Variance Direct Labor Efficiency Variance $630 Favourable -$4,980 Unfavourable Total Direct Labor Cost variance $4,350 Unfavourable 1 c) Variable Overhead variance Variable Overhead Rate variance | $720 Unfavourable Variable Overhead Efficiency variance | $1,140 Unfavourable i Variable Overhead Rate Variance = ( Standard Rate - Actual Rate) * Actual hours Variable Overhead Efficiency Variance = ( Standard hours for Actual production - Actual hours) * Standard Rate Working note Actual price Actual Actual Rate Standard Rate Standard cost | Standard 1 hours Standard Rate Actual Hours Hours 1,800 Actual Variable OH at actual rate $4.200 1,800 $7,560 Actual Variable OH at std rate $3.80 1,500 $6,840 Standard Variable OH at std rate ariable OH at std rate $3.80 $5,700 Variable Overhead Rate Variance Variable Overhead Efficiency Variance $720 Unfavourable $1,140 Unfavourable Total Variable Overhead variance $1,860 Unfavourable Req2 Material price Variance Material Quantity Variance Labor rate variance Labor efficiency variance Variable overhead rate variance Variable overhead efficiency variance Favourablel Unfavourable -$5,580 $560 $630 -$4,980 $720 -$1,140 $1,190 $12,420 Net Variance $11,230 Unfavourable