1. Compute the allocation rate that was used for manufacturing overheadin Exhibits 2 and 3. Using these rates, show the computations that were used for allocating manufacturing overhead in Exhibits 2 and 3.

2. Exhibit 4 shows a negative $15,000 overhead volume variance. Explain why it exists and why it is negative.

3. Exhibit 4 also shows a positive $2,800 overhead budget variance. What are the potential causes for it?

4. In Exhibit 4, the operating income is larger under absorption costing than under variable costing. Why? Please be very explicit in explaining the reason for the difference.