Flexible budgets, 4-variance analysis. (CMA, adapted) (15-25 minutes) Nolton-Ragnvald, AS, uses a standard costing system. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labour-hours (DLH). Nolton develops its manufacturing overhead rate from the current annual budget. The manufacturing overhead budget for 2000 is based on budgeted output of 720,000 units requiring 3,600,000 direct manufacturing labour-hours. The company is able to schedule production uniformly throughout the year.

A total of 66,000 output units requiring 315,000 direct labour-hours was produced during May 1999. Manufacturing overhead (MOH) costs incurred for May amounted to NKr 375,000. The actual costs as compared with the annual budget and '/, of the annual budget are shown below. nkio8

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ANNUAL MANUFACTURING OVERHEAD BUDGET 2000 Variable MOH Indirect manufacturing labour Supplies Fixed MOH Supervision Utilities Depreciation Total PER MONTHLY ACTUAL PER DLH MOH MOH TOTAL AMOUNT OUTPUT INPUT BUDGET, COSTS FOR UNIT UNIT MAY 2000 MAY 2000 NKr 900,000 NKr 1.25 NKr0.25 NKr 75,000 NKr 75,000 1,224,000 1.70 0.34 102,000 111,000 648,000 0.90 0.18 54,000 51,000 540,000 0.75 0.15 45,000 54,000 1,008,000 1.40 0.28 84,000 84,000 NKr 4,320,000 NKr 6.00 NKr 1.20 NKr 360,000 NKr 375,000 REQUIRED Calculate the following amounts for Nolton-Ragnvald for May 2000: 1. Total manufacturing overhead costs allocated. 2. Variable manufacturing overhead spending variance. 3. Fixed manufacturing overhead spending variance. 4. Variable manufacturing overhead efficiency variance. 5. Production-volume variance. Be sure to identify each variance as favourable (F) or unfavourable (U).