Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems
Posted: Tue Nov 16, 2021 9:29 am
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:
*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:
*Based on machine-hours.
During June the plant produced 5,000 pools and incurred the
following costs:
Used 16,300 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 $7.10 per hour.
Incurred variable manufacturing overhead cost totaling $10,890
for the month. A total of 3,300 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.
Westwood Plant. The plant has been experiencing problems as shown
by its June contribution format income statement below:
*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:
*Based on machine-hours.
During June the plant produced 5,000 pools and incurred the
following costs:
Used 16,300 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 $7.10 per hour.
Incurred variable manufacturing overhead cost totaling $10,890
for the month. A total of 3,300 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.