Garcia Corp’s current year annual budget for variable and fixed overhead costs total $192,500 and $220,000 respectively. The company uses machine-hours to allocate all overhead costs. The current year’s annual budget included 55,000 machine hours and the production of 44,000 units.

Garcia’s actual results include the production of 60,000 units using 72,500 machine hours. Variable overhead costs were $245,870 and fixed overhead costs totaled $240,000.

a. Compute a three-column variance analysis of variable manufacturing overhead including variance descriptions.

b. Compute a three-column variance analysis of fixed manufacturing overhead including variance descriptions.

c. Is Fixed Overhead Under or Over Allocated. Indicate using U or O and include the amount of under-or over-allocated overhead.

d. What is an important insight about Garcia’s capacity based on your analysis of Fixed Overhead?