Clothing is a manufacturer of designer suits. For June 2020, each suit is budgeted to take 5 labor-hours. The budgeted number of suits to be manufactured in June 2020 is 1,160. Esquire Clothing allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labor-hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2020 are budgeted, $69,600 and actual, $63,916. In June 2020 there were 1,220 suits started and completed. There were no beginning or ending inventories of suits.

Requirements

1. Compute the spending variance for fixed manufacturing overhead. Comment on the results.

2. Compute the production-volume variance for June 2020.

What inferences can Esquire Clothing draw from this variance?

Requirement 1. Compute the spending variance for fixed manufacturing overhead. Comment on the results.

Begin by computing the following amounts for the fixed manufacturing overhead.

		Flexible Budget:
Actual Costs Incurred	Same Budgeted Lump Sum Regardless of Output Level	Same Budgeted Lump Sum Regardless of Output Level	Allocated Overhead