Munoz Manufacturing Company produces a component part of a top secret military communication device. Standard production and cost data for the part, Product X, follow:

Planned production		21,000	units
Per unit direct materials		1.90	pounds	@	$	1.60	per pound
Per unit direct labor		2.60	hours	@	$	8.50	per hour
Total estimated fixed overhead costs	$	485,100

Munoz purchased and used 43,030 pounds of material at an average cost of $1.66 per pound. Labor usage amounted to 53,500 hours at an average of $8.59 per hour. Actual production amounted to 21,900 units. Actual fixed overhead costs amounted to $521,100. The company completed and sold all inventory for $1,900,000.

A. Calculate the predetermined overhead rate, assuming that Munoz uses the number of units as the allocation base.

Predetermined overhead rate

per unit

B. Calculate the fixed cost spending and volume variances.

Spending variance		U
Volume variance		F

C.Determine the amount of gross margin Munoz would report on the year-end income statement.

Gross margin