Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs).

Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor-hours per suit. For June 2017, each suit is budgeted to take 4 labor-hours. Budgeted variable manufacturing overhead cost per labor-hour is $12. The budgeted number of suits to be manufactured in June 2017 is 1,040. Actual variable manufacturing costs in June 2017 were $52,164 for 1,080 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor-hours for June were 4,536.

1. Compute the flexible-budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead.

2. Comment on the results.

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

	Actual Input Qty.
Actual Costs	x		Allocated
Incurred	Budgeted Rate	Flexible Budget	Overhead
52164		51840

Now compute the variances: flexible-budget variance, then spending variance, and finally the efficiency variance. Label each variance as favorable (F) or unfavorable (U).

Flexible-budget variance

324

U

Spending variance

2268

F

Efficiency variance

216

U

Requirement 2. Comment on the results.

Esquire had a __________ spending variance because the actual variable overhead rate per direct manufacturing labor-hour was___________than the budgeted. It had __________efficiency variance because each suit averaged

_______labor-hours than budgeted.