Muster Company uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of machine-hours. The company's condensed flexible budget for manufacturing overhead is given below:

	Per Machine Hour	Machine Hours
		20,000	25,000	30,000
Variable overhead costs	$4	$80,000	$100,000	$120,000
Fixed overhead costs		450,000	450,000	450,000
Total overhead costs		$530,000	$550,000	$570,000

The denominator level of activity is 30,000 machine hours. Standards call for 3.0 machine hours per unit of output. Actual activity and manufacturing overhead costs for the year are given below:

Units produced	10,800 units
Machine hours used	31,000 machine hours
Overhead costs incurred:
Variable costs	$126,000
Fixed costs	$440,000

Required: (YOU MUST SHOW ALL OF YOUR WORK FOR FULL MARKS) a) What are the standard hours allowed for the output?

b) What was the variable overhead spending variance? Is it favourable or unfavourable?

c) What was the variable overhead efficiency variance? Is it favourable or unfavourable?

d) What was the fixed overhead budget variance? Is it favourable or unfavourable?

e) What was the fixed overhead volume variance? Is it favourable or unfavourable?

f) In a standard costing system, if factory overhead in total is underapplied, then the overhead variances will be unfavourable. Is this correct? Why or why not? Answer in no more than three sentences.