Baird Company makes classic Polish sausage. The company uses a standard cost system to help control costs. Manufacturing overhead is applied to production on the basis of standard direct labor-hours. According to the companys planning budget, the following manufacturing overhead costs should be incurred at an activity level of 27,000 labor-hours (the denominator activity level): Variable manufacturing overhead cost $ 135,000 Fixed manufacturing overhead cost 189,000 Total manufacturing overhead cost $ 324,000 During the most recent year, the following operating results were recorded: Activity: Actual labor-hours worked 24,000 Standard labor-hours allowed for the actual output 25,000 Cost: Actual variable manufacturing overhead cost incurred $ 156,000 Actual fixed manufacturing overhead cost incurred $ 168,750 At the end of the year, the companys Manufacturing Overhead account contained the following data: Manufacturing Overhead Debit Credit Actual 324,750 Applied 300,000 24,750 Management would like to determine the cause of the $24,750 underapplied overhead.

Required: 1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. 2. Show how the $300,000 Applied figure in the Manufacturing Overhead account was computed. 3. Break down the $24,750 underapplied overhead into four components: (1) variable overhead rate variance, (2) variable overhead efficiency variance, (3) fixed overhead budget variance, and (4) fixed overhead volume variance.