Culpepper Corporation had the following inventories at the beginning and end of the month of January: $$\begin{array}{lrr} & \text { January 1 } & \text { January 31 } \\ \hline \text { Finished goods } & \$ 125,000 & \$ 117,000 \\ \text { Work-in-process } & 235,000 & 251,000 \\ \text { Direct materials } & 134,000 & 124,000 \end{array}$$ The following additional manufacturing data was available for the month of January. $$\begin{array}{ll} \text {Direct materials purchased} & \text {\$ 189,000} \\ \text {Transportation in} & \text {3,000}\\\ \text {Direct labor} & \text {400,000}\\\ \text {Actual factory overheadd} & \text {175,000}\\\ \end{array}$$ Culpepper Corporation applies factory overhead at a rate of \(40 \%\) of direct labor cost, and any overapplied or underapplied factory overhead is deferred until the end of the year. Culpepper's balance in its factory overhead control account at the end of January was: 1\. \(\$ 15,000\) overapplied. 2\. \(\$ 15,000\) underapplied. 3\. \(\$ 5,000\) underapplied. 4\. \(\$ 5,000\) overapplied.

Tred-America, Inc., manufactures tires for large auto companies. It uses standard costing and allocates variable and fixed manufacturing overhead based on machine-hours. For each independent scenario given, indicate whether each of the manufacturing variances will be favorable or unfavorable or, in case of insufficient information, indicate "CBD" (cannot be determined).

Explain how the analysis of fixed manufacturing overhead costs differs for (a) planning and control and (b) inventory costing for financial reporting.

Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed-cost category (manufacturing overhead costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor- hours per suit. For June 2017 , each suit is budgeted to take 4 labor-hours. Budgeted variable manufacturing overhead cost per labor-hour is \(\$ 12\). The budgeted number of suits to be manufactured in June 2017 is 1,040. Actual variable manufacturing costs in June 2017 were \(\$ 52,164\) for 1,080 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor-hours for June were 4,536. 1\. Compute the flexible-budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead. 2\. Comment on the results.

Consider the following two situations - cases A and B?independently. Data refer to operations for April 2017. For each situation, assume standard costing. Also assume the use of a flexible budget for control of variable and fixed manufacturing overhead based on machine-hours.

What are the factors that affect the spending variance for variable manufacturing overhead?