# Esquire had a favorable spending variance of 2268

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2.Esquire had a favorable spending variance of \$2,268 because the actual variable overheadrate was \$11.50 per direct manufacturing labor-hour versus \$12 budgeted. It had an unfavorableefficiency variance of \$2,592 U because each suit averaged 4.2 labor-hours (4,536 hours ÷ 1,080suits) versus 4.0 budgeted labor-hours.8-22 Fixed manufacturing overhead, variance analysis (continuation of 8-21). EsquireClothing allocates fixed manufacturing overhead to each suit using budgeted directmanufacturing labor-hours per suit. Data pertaining to fixed manufacturing overhead costs forJune 2017 are budgeted, \$62,400, and actual, \$63,916.Required:1.Compute the spending variance for fixed manufacturing overhead. Comment on the results.2.Compute the production-volume variance for June 2017. What inferences can Esquire Clothingdraw from this variance?
=\$15 per hourFixed Manufacturing Overhead Variance Analysis for Esquire Clothing for June2017Actual CostsIncurred(1)Same Budgeted Lump Sum(asinStaticBudget)Regardless ofOutput Level(2)Flexible Budget:Same Budgeted Lump Sum (asinStaticBudget)Regardless ofOutput Level(3)Allocated:Budgeted InputQty.AllowedforActual Output ×BudgetedRate(4)\$63,916\$62,400\$62,400(4×1,080×\$15)\$64,800\$1,516 U\$2,400 FSpending varianceNever a varianceProduction-volume variance\$1,516 U\$2,400 FFlexible-budget varianceProduction-volume varianceThe fixed manufacturing overhead spending variance and the fixed manufacturing flexible budget variance are the same––\$1,516U. Esquire spent \$1,516 above the \$62,400 budgeted amount for June 2017.The production-volume variance is \$2,400 F. This arises because Esquireutilized its capacity more intensively than budgeted (the actual production of1,080 suits exceeds the budgeted 1,040 suits). This results in overallocatedfixed manufacturing overhead of \$2,400 (4 × 40 × \$15). Esquire would wantto understand the reasons for a favorable production-volume variance. Is themarket growing? Is Esquire gaining market share? Will Esquire need to addcapacity?8-23Variable manufacturing overhead variance analysis. The Sourdough Bread Companybakes baguettes for distribution to upscale grocery stores. The company has two direct-costcategories: direct materials and direct manufacturing labor. Variable manufacturing overhead isallocated to products on the basis of standard direct manufacturing labor-hours. Following issome budget data for the Sourdough Bread Company:8-°