Three-variance method of overhead variance anaiysis Blanchart Ltd. is a manufacturing business that produces and sells automobile parts for several different automobile manufacturers. Blanchart applies overhead at the rate of $9 per direct labor hour to all products it makes. The company uses 100,000 direct labor hours as its estimate of normal capacity in setting its overhead rate. Estimated fixed overhead cost for 1992 is $700,000.

At the end of 1992, the manufacturing overhead control account had a balance of $963,000. During the year, actual direct labor hours were 112,400, and standard direct labor hours for the output produced are 109,200.

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REQUIRED a. Prepare a three-variance overhead analysis isolating the spending, efficiency, and volume variances. Computer requirements Data are provided below for three other possible overhead application bases: Direct materials cost Direct labor cost Budgeted $2,000,000 800,000 2,800,000 Actual $2,050,000 Standard $2,184,000 955,400 3,005,400 873,600 3,057,600 Prime cost b. Compute the manufacturing overhead application base using each of the three application bases above. c. Prepare a three-variance analysis of variance for each of the three application bases direct materials cost, direct labor cost, and prime cost.