Help Save& Exit 2 Miller Toy Company by its June contribution forma a plastic sw

Question

Help Save& Exit 2 Miller Toy Company by its June contribution forma a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as t income statement below paints Dodget Sales (,000 poola) Variable cost of goods sold* ,960 106,490 -34000 16,000 Contribation margin 65,000 65,000 Total £ixed expenses Rterences Janet Dunn, who has just been appointed general manager of the Westwood Piant, has been given instructions to "get things under control." Upon reviewing the plant's income statement, Ms. Dunn has concluded that the major problem Ses in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool Coat 3.0 pounds 2.30 per pound 7.50 Direct 1abor .3 hours 2.60 per hour 0-7 Total standard eost per unit During June, the plant produced 8,000 pools and incurred the following costs: a Purchased 29,000 pounds of materials at a cost of $2.95 per pound. b. Used 23.800 pounds of materials in production (Finished goods and work in process inventories are insignificant and can be ignored. Worked 3,800 direct labor hours at a cost of $0.80 per hour d. Incurred variable manufacturing overhead cost totaling $8,100 for the month. A total of 2,700 machine-hours was recorded It is the company's policy to close all variances to cost of goods sold on a monthly basis. Required: a. Materials price and quantity variances the net overall favorable or unfavorable variance for the month. 2. Summarize the variances that you computed in () above by showing

Explanation / Answer

a) Material Price Variance = (standard rate-actual rate)*actual quantity Material Price Variance = (2.50-2.95)*29000 = 13050 unfavourable Material quantity variance = (standard quantity-actual quantity) * standard price Material quantity variance = ( 8000*3-23800)*2.50 material quantity variance = 500 favourable b) Labour price Variance = ( standard rate -actual rate )* actual hour labour price variance = (7.10-6.80) *3800 labour price variance = 1140 favourable labour efficiency Variance = ( standard hour-actual hour)*standard rate labour efficiency variance = (8000*0.4-3800)7.10= 4260 unfavourable c) Variable overhead spending variance = (std rate- actual rate )*actual hours Variable overhead spending variance = (2.60-3)*2700 = 1080 unfavourable actual rate = 8100/2700 = 3 Variable overhead Efficiency variance (Standard hour-actual hour)*standard rate (8000*0.30-2700)*2.60 = 780 unfavourable 2) Matrial price variance = 13050(u) material qty variance = 500 (f) labour price variance = 1140 (f) labou efficiency variance = 4260(u) variable rate variance = 1080(u) variable oh effiecency variance= 780(u) net varince = 17530 (u)

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