Normal Costing and Overhead Analysis The Blaney Company had budgeted the following performance for 19_4:

Units 10,000 Sales $120,000 Total variable production costs, including variable factory overhead of $5,000 60,000 Total fixed production costs 25,000 Gross margin 35,000 Beginning inventories None It is now December 31, 19_4. The factory-overhead rate that was used throughout the year was $3 per unit. Total factory overhead incurred was $30,000. Underapplied factory overhead was $900. There is no work in process.

1. How many units were produced during 19_4?
2. Nine thousand units were sold at regular prices during 19_4. Assuming that the predicted cost behavior patterns implicit in the budget above have conformed to the plan (except for variable factory overhead), and that underapplied factory overhead is written off directly as an adjustment of cost of goods sold, what is the gross margin for 19_4? How much factory overhead should be assigned to the ending inventory if it is to be carried at “normal” cost?
3. Explain why overhead was underapplied by $900. In other words, analyze the variable- and fixed-overhead variances as far as the data permit.