Maham Company produces a single product, bags made of a sturdy nylon fabric. The production of these bags requires a relatively large amount of labour time. Overhead cost is applied on the basis of standard direct labour-hours. The company's condensed flexible budget for manufacturing overhead is given below: Direct Labour-Hours Cost Formula (per DLH) 12,000 $24,000 15,000 $30,000 18,000 $36,000 Overhead costs Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost 75,000 75,000 75,000 $99,000 $105,000 $111,000 Each backpack requires 2 metres of direct material that has a standard cost of $1.50 per metre. The product requires 1.6 hours of direct labour time. The standard labour rate is $15 per hour. During the year, the company had planned to operate at a denominator activity level of $18,000 direct labour-hours and to produce 10,000 units of product. Actual activity and costs for the year were as follows: Number of units produced Actual direct labour-hours worked Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 11,000 17,000 $30,500 $75,500 Required: 1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed components 2. a. Compute the standard direct labour-hours allowed for the year's production. b. Complete the over/under applied manufacturing overhead. 3. Determine the reason for the underapplied or overapplied overhead from (2) above by computing the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances