PROBLEM 10A-9 Applying Overhead; Overhead Variances LO10-3, LO10-4 Baird Company makes classic Polish sausage. The company uses a standard cost system to help control costs. Manufacturing overhead is applied to production on the basis of standard direct labor-hours. According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level of 35,000 labor-hours (the denominator activity level): Variable manufacturing overhead cost ... Fixed manufacturing overhead cost Total manufacturing overhead cost $ 87,500 210,000 $297,500 During the most recent year, the following operating results were recorded: 30,000 32,000 Activity: Actual labor-hours worked Standard labor-hours allowed for the actual output....... Cost: Actual variable manufacturing overhead cost incurred ..... Actual fixed manufacturing overhead cost incurred...... $78,000 $209,400 At the end of the year, the company's Manufacturing Overhead account contained the following data: Manufacturing Overhead Actual 287,400 Applied 272,000 15,400 Management would like to determine the cause of the $15,400 underapplied overhead. Required: 1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. 2. Show how the $272,000 Applied figure in the Manufacturing Overhead account was computed. 3. Breakdown the $15,400 underapplied overhead into four components: (1) variable overhead rate variance, (2) variable overhead efficiency variance, (3) fixed overhead budget variance, and (4) fixed overhead volume variance. 4. Explain the meaning of each variance that you computed in (3) above