Comprehensive Variance Analysis
(1a) Materials price variance: $3,100 F
(2) Net variance: $5,850 U
Kramer Toy Company manufactures a plastic swimming pool at its East Crest Plant. The plant has been experiencing problems as shown b
Sales (16,000 pools)
Variable cost of goods sold*
Variable selling expenses
Total variable expenses
Selling and administrative
Total fixed expenses
Net operating income
*Contains direct materials, direct labor, and variable manufacturing overhead.
Janet Wilson, who has just been appointed general manager of the East Crest Plant, has been given instructions to “get things under control.” Upon reviewing th
Ms. Wilson has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per s
$2.40 per pound
$9.50 per hour
Variable manufacturing overhead
$3.20 per hour
Total standard cost
* Based on machine-hours.
Ms. Wilson has determined that during September the plant produced 16,000 pools and incurred the following costs:
Purchased 62,000 pounds of materials at a cost of $2.35 per pound.
Used 51,200 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)
Worked 12,200 direct labor-hours at a cost of $10.20 per hour.
Incurred variable manufacturing overhead cost totaling $18,910 for the month. A total of 6,100 machine-hours were recorded.
It is the company’s policy to close all variances to cost of goods sold on a monthly basis.
Compute the following variances for September:
Direct materials price and quantity variances.