Graphs and overhead variances. The Carvelli Company is a manufacturer of housewares.

In its job-costing system, manufacturing overhead (both variable and fixed) is allocated to products based on budgeted machine-hours. The budgeted amounts are taken from Carvelli’s standard-costing system. The budget for 2007 included:

Variable manufacturing overhead $10.80 per machine-hour Fixed manufacturing overhead $86,400,000 Denominator level 4,000,000 machine-hours Required 1. Prepare four graphs, two for variable manufacturing overhead and two for fixed manufac¬

turing overhead. Each pair of graphs should display how total manufacturing overhead costs of Carvelli will be depicted for the purpose of

(a) planning and control and

(b) inventory costing.

2. Suppose that 3,500,000 machine-hours were allowed for actual output achieved in 2007, but 3,800,000 machine-hours were used. Actual manufacturing overhead was variable, $43,320,000; fixed, $86,640,000. Compute

(a) variable manufacturing over¬

head spending and efficiency variances and

(b) the fixed manufacturing overhead spending and production-volume variances. Use the columnar presentation illustrated in Exhibit 8-2

(p. 290).

3. What is the amount of the under- or overallocated variable manufacturing overhead?

Of the under- or overallocated fixed manufacturing overhead? Why are the flexiblebudget variance and the under- or overallocated overhead amount always the same for variable manufacturing overhead but rarely the same for fixed manufacturingoverhead?

4. Suppose the denominator level was 3,000,000 rather than 4,000,000 machine-hours.

What variances in requirement 2 would be affected? Recompute them.