EXERCISE 10-15 (CONTINUED) ALTERNATIVE SOLUTION

2. Summary of variances: Material price variance ... $ 3,000 F Material quantity variance ... 8,400 U Labor rate variance... 11,800 U Labor efficiency variance... 1,200 F Variable overhead spending variance ... 590 U Variable overhead efficiency variance... 300 F Net variance ... $16,290 U The net unfavorable variance of $16,290 for the month caused the plant’s variable cost of goods sold to increase from the budgeted level of $180,000 to $196,290: Budgeted cost of goods sold at $12 per pool ... $180,000Add the net unfavorable variance, as above... 16,290Actual cost of goods sold ... $196,290 This $16,290 net unfavorable variance also accounts for the difference between the budgeted net operating income and the actual net operat-ing income for the month. Budgeted net operating income ... $36,000Deduct the net unfavorable variance added to cost of goods sold for the month... 16,290Net operating income ... $19,710