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 18,000 labor-hours (the denominator activity level):

Variable manufacturing overhead cost $ 49,500

Fixed manufacturing overhead cost 85,500

Total manufacturing overhead cost $ 135,000

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

Activity:

Actual labor-hours worked 15,000

Standard labor-hours allowed for the actual output 16,000

Cost:

Actual variable manufacturing overhead cost incurred $ 57,000

Actual fixed manufacturing overhead cost incurred $ 72,000

At the end of the year, the companys Manufacturing Overhead account contained the following data:

Manufacturing Overhead Actual 129,000 Applied 120,000 9,000

Management would like to determine the cause of the $9,000 underapplied overhead.

Required: 3. Breakdown the $9,000 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.