Highland Shortbread, Ltd., of Aberdeen, Scotland, produces a single product and uses a standard cost system to help control costs. Manufacturing overhead is applied to production on the basis of standard machine-hours. According to the companys flexible budget, the following overhead costs should be incurred at an activity level of 19,800 machine-hours (the denominator activity level chosen for the year):

Variable manufacturing overhead cost		37,620
Fixed manufacturing overhead cost		70,290
Total manufacturing overhead cost		107,910

During the year, the following operating results were recorded:

Actual machine-hours worked		15,800
Standard machine-hours allowed		14,800
Actual variable manufacturing overhead cost incurred		45,000
Actual fixed manufacturing overhead cost incurred		74,690

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

Manufacturing Overhead

Actual costs	119,690	Applied costs	80,660
	39,030

Management would like to determine the cause of the 39,030 underapplied overhead.

Required:
1.	Compute the predetermined overhead rate for the year. Break it down into variable and fixed cost elements.(Round your answers to 2 decimal places. Omit the "" sign in your response.)

	Predetermined Overhead Rate
Total rate	per MH
Variable element	per MH
Fixed element	per MH

2.	Show how the 80,660 Applied costs figure in the Manufacturing Overhead account was computed.(Round your per MH value to 2 decimal places. Omit the "" sign in your response. )

standard MHs per MH =

3.

Analyze the 39,030 underapplied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.(Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "" sign in your response.)

Variable overhead:
Efficiency variance		(Click to select)FNoneU
Rate variance		(Click to select)FNoneU
Fixed overhead:
Volume variance		(Click to select)UFNone
Budget variance		(Click to select)FNoneU