Mo Coughlin and Associates is a medium-sized company located near a large metropolitan area in the Prairies. The company manufactures cabinets of mahogany, oak, and other fine woods for use in expensive homes, restaurants, and hotels. Although some of the work is custom, many of the cabinets are a standard size. One non-custom model is called the Luxury Base Frame. Normal production is 1,000 units per month. Each unit has a direct labour hour standard of five hours. Overhead is applied to production based on standard direct labour hours. During the most recent month, only 900 units were produced; 4,500 direct labour hours were allowed for standard production, but only 4,000 hours were used. Standard and actual overhead costs were as follows:

		Standard (1,000 units)				Actual (900 units)
Indirect materials			$ 12,000				$ 12,300
Indirect labour			43,000				51,000
Manufacturing supervisors, salaries (fixed)			22,500				22,000
Manufacturing office employees, salaries (fixed)			13,000				12,500
Engineering costs (fixed)			27,000				25,000
Computer costs			10,000				10,000
Electricity			2,500				2,500
Manufacturing building depreciation (fixed)			8,000				8,000
Machinery depreciation (fixed)			3,000				3,000
Trucks and forklift depreciation (fixed)			1,500				1,500
Small tools			700				1,400
Insurance (fixed)			500				500
Property taxes (fixed)			300				300
Total			$144,000				$150,000

Questions:

1. Determine the overhead application rate. (Round answer to 2 decimal places, e.g. 15.25.)

2. Determine how much overhead was applied to production. 3. Calculate the overhead budget variance and the overhead volume variance. Decide whether they are Favourable or Unfavourable. (Round intermediate calculation to 2 decimal places, e.g. 15.25 and final answers to the nearest whole dollar, e.g. 5,275.)

4. Decide which overhead variances should be investigated. (Choose one From:1. The overhead volume variance. 2. Neither Variance 3. Both Variances 4. The budget overhead variance)