Three-variance overhead analysis Refer to the overhead data for the Freestone Company presented in Exercise 9-7.

Exercise 9-7

Two-variance overhead analysis The Freestone Company uses machine hours as the basis for applying overhead to products. The company's 1993 overhead budget was $200,000 of which $110,000 was fixed overhead cost. The budget was based on an expected activity level of 40,000 machine hours, or 10,000 units which is normal capacity. During 1993, the company manufac- tured 9,600 units using 41,000 actual machine hours. The standard number of machine hours required for the units produced is 38,400. Actual manufacturing overhead for 1993 was $196,700.

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REQUIRED Use the three-variance approach to analyze the overhead variance for 1993.