Overhead variance analysis relationships Rafer Company manufactures control panels for hard-rock drilling machines. It takes 5 machine hours at standard to produce one control panel. Overhead is applied to products at the rate of $9 per machine hour. The variable part of the overhead rate is $5 per hour. Total budgeted fixed manufacturing overhead cost is $200,000.

The two variance method of overhead variance analysis yields a $2,000 favorable controllable variance and a $16,000 unfavorable volume variance. The management of Rafer Company would like to use the three-variance method of overhead variance analysis, but the current company accountant is only familiar with the two variance approach. During the year, actual machine hours exceeded standard by 1,200.

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REQUIRED a. Compute the budgeted number of machine hours. b. Compute the budgeted number of units to be produced. c. Compute the standard machine hours. d. Compute the amount of applied overhead for the year e. Compute the amount of actual overhead during the year. f. Compute the actual machine hours used. g. Prepare a three-variance analysis isolating the spending, efficiency, and volume variances.