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 company's planning budget, the following manufacturing overhead costs should be incurred at an activity level of 35,000 labor-hours (the denominator activity level):

Variable manufacturing overhead cost$87,500Fixed manufacturing overhead cost210,000Total manufacturing overhead cost$297,500

During the most recent year, the following operating results were recorded:

Activity:Actual labor-hours worked30,000Standard labor-hours allowed for the actual output32,000Cost:Actual variable manufacturing overhead cost incurred$78,000Actual fixed manufacturing overhead cost incurred$209,400

At the end of the year, the company's Manufacturing Overhead account contained the following data:

Manufacturing OverheadActual287,400Applied272,00015,400

Management would like to determine the cause of the $15,400 underapplied overhead.

Required:

1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements.

2. Show how the $272,000 Applied figure in the Manufacturing Overhead account was computed.

3. Breakdown the $15,400 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.