DUBAI Manufacturing has established the following master flexible budget:

	Sales in Units
	100,000	150,000	200,000
Sales	$1,600,000	$2,400,000	$3,200,000
Less variable expenses:
Raw materials	200,000	300,000	400,000
Direct labor	250,000	375,000	500,000
Manufacturing overhead	175,000	262,500	350,000
Selling and administrative	100,000	150,000	200,000
Total variable	725,000	1,087,500	1,450,000
Contribution margin	875,000	1,312,500	1,750,000
Less fixed expenses:
Manufacturing overhead	300,000	300,000	300,000
Selling and administrative	240,000	240,000	240,000
Total fixed	540,000	540,000	540,000
Net operating income	$ 335,000	$ 772,500	$1,210,000

The company uses a standard cost system in which manufacturing overhead is applied to units of product based on machine-hours. At standard, each unit of product requires one machine-hour to complete. The denominator level of activity is 150,000 machine-hours, or 150,000 units. Actual data for the year were as follows:

Actual variable overhead cost	$211,680
Actual fixed overhead cost	$315,000
Actual machine-hours	126,000
Units produced	120,000

Required:

1:What are the predetermined variable and fixed manufacturing overhead rates for the year?

2:Compute the variable manufacturing overhead spending and efficiency variances for the year.

3:Compute the fixed manufacturing overhead budget and volume variances for the year.

4:Prepare a flexible budget.

5:Explain and interpret these variances.