Question
In: Accounting
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget | Actual | ||||||
| Sales (8,000 pools) | $ | 290,000 | $ | 290,000 | |||
| Variable expenses: | |||||||
| Variable cost of goods sold* | 104,400 | 124,770 | |||||
| Variable selling expenses |
20,000 |
20,000 | |||||
| Total variable expenses |
124,400 |
144,770 | |||||
| Contribution margin |
165,600 |
145,230 | |||||
| Fixed expenses: | |||||||
| Manufacturing overhead | 68,000 | 68,000 | |||||
| Selling and administrative | 86,000 | 86,000 | |||||
| Total fixed expenses |
154,000 |
154,000 | |||||
| Net operating income (loss) | $ | 11,600 | $ |
(8,770 |
) | ||
*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 Hours | Standard Price or Rate |
Standard Cost | ||||
| Direct materials | 3.6 pounds | $ |
2.20 |
per pound | $ | 7.92 |
| Direct labor | 0.5 hours | $ |
7.70 |
per hour | 3.85 | |
| Variable manufacturing overhead | 0.4 hours* | $ |
3.20 |
per hour |
1.28 |
|
| Total standard cost per unit | $ | 13.05 | ||||
*Based on machine-hours.
During June, the plant produced 8,000 pools and incurred the following costs:
- Purchased 33,800 pounds of materials at a cost of $2.65 per pound.
-
Used 28,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
-
Worked 4,600 direct labor-hours at a cost of $7.40 per hour.
-
Incurred variable manufacturing overhead cost totaling $12,600 for the month. A total of 3,500 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 (1) above by showing the net overall favorable or unfavorable variance for the month.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (3,000 pools)
$
179,000
$
179,000
Variable expenses:
Variable cost of goods sold*
33,390
44,540
Variable selling expenses
11,000
11,000
Total variable expenses
44,390
55,540
Contribution margin
134,610
123,460
Fixed expenses:
Manufacturing overhead
50,000
50,000
Selling and administrative
75,000
75,000
Total fixed expenses
125,000
125,000
Net operating income...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (6,000
pools)
$
265,000
$
265,000
Variable expenses:
Variable cost of goods sold*
95,580
112,700
Variable selling expenses
14,000
14,000
Total variable expenses
109,580
126,700
Contribution margin
155,420
138,300
Fixed expenses:
Manufacturing overhead
63,000
63,000
Selling and administrative
78,000
78,000
Total fixed expenses
141,000
141,000
Net operating income...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (5,000 pools)
$
235,000
$
235,000
Variable expenses:
Variable cost of goods sold*
71,350
86,370
Variable selling expenses
13,000
13,000
Total variable expenses
84,350
99,370
Contribution margin
150,650
135,630
Fixed expenses:
Manufacturing overhead
62,000
62,000
Selling and administrative
77,000
77,000
Total fixed expenses
139,000
139,000
Net operating income...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (3,000 pools)
$
175,000
$
175,000
Variable expenses:
Variable cost of goods sold*
24,300
58,310
Variable selling expenses
10,000
10,000
Total variable expenses
34,300
68,310
Contribution margin
140,700
106,690
Fixed expenses:
Manufacturing overhead
50,000
50,000
Selling and administrative
65,000
65,000
Total fixed expenses
115,000
115,000
Net operating income...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (7,000 pools)
$
235,000
$
235,000
Variable expenses:
Variable cost of goods sold*
78,540
96,420
Variable selling expenses
18,000
18,000
Total variable expenses
96,540
114,420
Contribution margin
138,460
120,580
Fixed expenses:
Manufacturing overhead
54,000
54,000
Selling and administrative
69,000
69,000
Total fixed expenses
123,000
123,000
Net operating income...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (7,000
pools)
$
235,000
$
235,000
Variable expenses:
Variable cost of goods sold*
78,540
96,420
Variable selling expenses
18,000
18,000
Total variable expenses
96,540
114,420
Contribution margin
138,460
120,580
Fixed expenses:
Manufacturing overhead
54,000
54,000
Selling and administrative
69,000
69,000
Total fixed expenses
123,000
123,000
Net operating income...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (4,000 pools)
$
239,000
$
239,000
Variable expenses:
Variable cost of goods sold*
57,680
70,390
Variable selling expenses
16,000
16,000
Total variable expenses
73,680
86,390
Contribution margin
165,320
152,610
Fixed expenses:
Manufacturing overhead
72,000
72,000
Selling and administrative
82,000
82,000
Total fixed expenses
154,000
154,000
Net operating income...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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:
Budgeted
Actual
Sales (6,000 pools)
$
273,000
$
273,000
Variable expenses:
Variable cost of goods
sold*
83,460
102,050
Variable selling expenses
24,000
24,000
Total variable expenses
107,460
126,050
Contribution margin
165,540
146,950
Fixed expenses:
Manufacturing overhead
65,000
65,000
Selling and administrative
90,000
90,000
Total fixed expenses
155,000
155,000
Net operating income
$...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (8,000 pools)
$
265,000
$
265,000
Variable expenses:
Variable cost of goods sold*
88,960
106,490
Variable selling expenses
16,000
16,000
Total variable expenses
104,960
122,490
Contribution margin
160,040
142,510
Fixed expenses:
Manufacturing overhead
65,000
65,000
Selling and administrative
80,000
80,000
Total fixed expenses
145,000
145,000
Net operating income...
Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been...
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 Budget
Actual
Sales (6,000 pools)
$
273,000
$
273,000
Variable expenses:
Variable cost of goods sold*
83,460
102,050
Variable selling expenses
24,000
24,000
Total variable expenses
107,460
126,050
Contribution margin
165,540
146,950
Fixed expenses:
Manufacturing overhead
65,000
65,000
Selling and administrative
90,000
90,000
Total fixed expenses
155,000
155,000
Net operating income...
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