PROBLEM 10-15 Comprehensive Variance Analysis L010-1, L010-2, LO10-3] Miller Toy

Question

PROBLEM 10-15 Comprehensive Variance Analysis L010-1, L010-2, LO10-3] Miller Toy Company manufacturcs a plastic swimming pool at its Westwood Plant. The plant has been expcriencing problems as shown by its June contribution format income statement below: Budgeted Actual Salos (15,000 pools) Variable expenses: $450,000 $450.000 Variable cost of goods sold" 180,000 196,290 20,000 Variable selling expenses .. Total variable expenses Contribution margin Fixed expenses: 20,000 200.000216.290 250,000233,710 Manufacturing overhead 130.000 84,000 Selling and administrative Total fixed expenses Net operating income 130,000 84.000 214,000214,000 $ 36,000 $ 19,710 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

Explanation / Answer

Material price variance = Actiual quanity purchased x (Std. price per pound - Actual price per pound)  

= 60,000 pounds x ($2 - $1.95)

= $3,000 (Favourable)

Since the Actual price per unit ($1.95) is less than the Standard price per unit ($2), the variance is favorable.

Material quantity variance = Standard price per pound x (Standard quantity - actual quantity used)

Standard quantity for actual production = 15,000 pools x 3 pounds = 45,000 pounds.

Therefore, material quantity variance = $2 x (45,000 pounds - 49,2000 pounds)

= $8,400 (Unavorable)

The variance is unfavorable because the actual quantity used in production of 15,000 pools is more than the standard quantity.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.