Graphs and overhead variances. Fresh, Inc. is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2009, budgeted fixed manufacturing overhead cost was $18,000,000. Budgeted variable manufacturing overhead was $9 per machine-hour. The denominator level was 1,000,000 machine-hours.

1. Prepare a graph for fixed manufacturing overhead. The graph should display how Fresh, Inc.’s fixed manufacturing overhead costs will be depicted for the purposes of (a) planning and control and (b) inventory costing.

2. Suppose that 875,000 machine-hours were allowed for actual output produced in 2009, but 950,000 actual machine-hours were used. Actual manufacturing overhead was $9,025,000, variable and $18,050,000, fixed. Compute (a) the variable manufacturing overhead spending and efficiency variances and (b) the fixed manufacturing overhead spending and production-volume variances. Use the columnar presentation illustrated in Exhibit 8-4.

3. What is the amount of the under- or overallocated variable manufacturing overhead and the under-or overallocated fixed manufacturing overhead? Why are the flexible-budget variance and the under-or overallocated overhead amount always the same for variable manufacturing overhead but rarely same for fixed manufacturing overhead?

4. Suppose the denominator level was 750,000 rather than 1,000,000 machine-hours. What variances requirement 2 would be affected? Re-compute them.