(Combined overhead rates) Kwan and Yamaguchi Industries manufactures a down-filled sleeping bag with the following standard cost information for 2007:

• Each sleeping bag requires 1 hour of machine time to produce.

• Variable overhead is applied at the rate of $9 per machine hour.

• Fixed overhead is applied at the rate of $12 per machine hour, based on an expected annual capacity of 30,000 machine hours.LO.1

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Production Statistics for 2007 Number of sleeping bags produced Actual number of machine hours Variable overhead cost incurred Fixed overhead cost incurred 31,000 units 33,300 hours $265,400 $354,500 a. Using a combined overhead rate, calculate variances using the two- variance approach. b. Using a combined overhead rate, calculate variances using the three- variance approach.