Help! Miller Toy Company manufactures a plastic swimming pool at its Westwood Pl

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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:

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:

Purchased 29,500 pounds of materials at a cost of $2.55 per pound.

Used 24,300 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

Incurred variable manufacturing overhead cost totaling $8,400 for the month. A total of 2,400 machine-hours was recorded.

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:

Required: 1. Compute the following variances for June: a. Materials price and quantity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Material price variance Material quantity variance b. Labor rate and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Labor rate variance Labor efficiency variance c. Variable overhead rate and efficiency variances. (Do not round your intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Variable overhead rate variance Variable overhead efficiency variance

Explanation / Answer

1a) Material price variance (actual price - standard price)*AQ purchased (2.55-2.10)*29500 13275 U Material efficiency variance (AQ used - std qty allowed)*standard rate (24,300 - 7000*3.5)*2.10 420 F b) labor rate variance (actual rate - standard rate )*actual hours (7.30 - 7.60)*3400 1020 F Direct labor Efficiency variance (actual hours - standard hours allowed)*standard rate (3,400 - 7000*.4)*7.60 4560 U c) Variable overhead rate variance (3.5 - 3.1)*2400 960 U Variable overhead Efficiency variance (2400 - 7000*.3)*3.1 930 U 2) Summary of variances material price variance 13,275 U material qty variance 420 F labor rate variance 1020 F labor efficiency variance 4,560 U variable overhead rate variance 960 U variable overhead efficiency variance 930 U net variance 18,285 U

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