Chilczuk, S.A., of Gdansk, Poland, is a major producer of 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
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. Breakdown 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.

Problem 10A-9 Applying Overhead; Overhead Variances [L010-3, LO10-4] Chilczuk, S.A., of Gdansk, Poland, is a major producer of 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 27,000 labor-hours (the denominator activity level): $ 135,000 189,000 Variable manufacturing overhead cost Fixed manufacturing overhead cost $324,000 Total manufacturing overhead cost During the most recent year, the following operating results were recorded: Activity Actual labor-hours worked 24,000 25,000 Standard labor-hours allowed for the actual output Cost: $ 156,000 $ 168,750 Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred At the end of the year, the company's Manufacturing Overhead account contained the following data: Manufacturing Overhead 324,750 Applied 300,000 Actual 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. Breakdown 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. Complete this question by entering your answers in the tabs below. Required 1 Required 3 Required 2 Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. (Round your answers to 2 decimal places.) Predetermined overhead rate per hour Variable element per hour Fixed element per hour Required 1 Required 2 Complete this question by entering your answers in the tabs below. Required 2 Required 3 Required 1 Show how the $300,000 Applied figure in the Manufacturing Overhead account was computed. (Round your per hour value to 2 decimal places.) per hour = Required 3 Required 1 actual hours worked x standard hours allowed x Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Breakdown 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. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Show less A Variable overhead: Rate variance Efficiency variance Fixed overhead: F Budget variance Volume variance U None ed 2 Required 3