Overhead Variance Analysis. A flexible budget for Jimbo Casting Company is in summary form as follows:

The standard rate of production is 6 units per machine hour, and normal volume has been defined at 80,000 machine hours. The company manufactured 420,000 units of product in 70,000 machine hours. Actual variable overhead was \(\$ 287,000\), and the fixed overhead was \(\$ 475,000\).
\section*{Required:}
1. Compute the amount of underapplied or overapplied overhead.
2. Compute the budget variance.
3. Explain the major causes of a budget variance.
4. Compute the capacity variance.
5. Cite three possible reasons for the existence of this capacity variance.

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Machine hours. 60,000 70,000 80,000 90,000 Variable overhead. $240,000 $280,000 $320,000 $360,000 Fixed overhead 480,000 Total overhead $720,000 480,000 $760,000 480,000 $800,000 $840,000 480,000