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:

  1. Purchased 33,800 pounds of materials at a cost of $2.65 per pound.
  2. Used 28,600 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

  3. Worked 4,600 direct labor-hours at a cost of $7.40 per hour.

  4. 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

Expert Solution


Related 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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT