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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: Flexible Budget Actual Sales (5,000 pools) Variable expenses: $200,000 $200,000 Variable cost of goods sold* Variable selling expenses Total variable expenses Contribution marain Fixed expenses: 54,100 67,330 16,000 83,330 129,900 116,670 16,000 70,100 Manufacturing overhead 52,000 52, 000 67,000 119,000 119,000 $10,900 (2,330) Selling and administrative 67,000 Total fixed expenses Net operating income (loss) "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 Standard Price Standard Hours or Rate Cost Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit 3.2 pounds 0.5 hours 0.4 hours $2.20 per pound$7.04 3.10 0.68 $ 10.82 $6.20 per hour 1.70 per hour *Based on machine-hours. During June the plant produced 5,000 pools and incurred the following costs a. Purchased 21,000 pounds of materials at a cost of $2.65 per pound b. Used 15,800 pounds of materials in production. (Finished goods and work in process inventories are insignificant and can be ignored.)

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