Planet Light First (PLF), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, PLF has decided to evaluate its financial performance using absorption costing income. The production-volume variance is written off to cost of goods sold. The variable cost of production is $2.80 per bulb. Fixed manufacturing costs are $1,170,000 per year. Variable and fixed selling and administrative expenses are $0.20 per bulb sold and $240,000, respectively. Because its light bulbs are currently popular with environmentally conscious customers, PLF can sell the bulbs for $9.50 each. PLF is deciding among various concepts of capacity for calculating the cost of each unit produced. Its choices are as follows: (Click the icon to view the capacity information.) Read the requirements. Data table my, dumm. duvn.) Theoretical capacity 900,000 bulbs Practical capacity unit 520,000 bulbs Normal capacity 260,000 bulbs (average expected output for the next 3 years) Master-budget capacity 225,000 bulbs expected production this year Print Done Requirement 2. Suppose PLF actually produces 300,000 bulbs. Calculate the production-volume variance using each level of capacity to compute the fixed manufacturing overhead allocation rate. Determine the formula that is used to calculate the production-volume variance. (Abbreviation used: mfg = manufacturing.) Total fixed mfg overhead - ( Fixed mfg overhead rate Actual production ) = Production-volume variance Next calculate the production-volume variance at each level of capacity. Label each variance as favorable (F) or unfavorable (U). Capacity type Production volume-variance Theoretical U Practical Normal Master-Budget