Flexible Budgets, Overhead Cost Variances, and Management Control Fixed manufacturing overhead variance analysis The Sourdough Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. The Sourdough Bread Company allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. The following is some budget data for the Sourdough Bread Company for 2020. Direct manufacturing labor use 0.02 hours per baguette Fixed manufacturing overhead $3.00 per direct manufacturing labor-hour The following is additional information for the Sourdough Bread Company for the year ended December 31, 2020: Planned (budgeted) output 3,100,000 baguettes Actual production 2,600,000 baguettes Budgeted direct manufacturing labor 62,000 hours Actual direct manufacturing labor 46,800 hours Actual fixed manufacturing overhead $294,000 2. Is fixed overhead underallocated or overallocated? By what amount? a. Use the ABS function when calculating the underallocated or overallocated amount. (Always use cell references and formulas where appropriate to receive full credit. If you copy/paste from the Instructions tab you will be marked wrong.)
Flexible Budgets, Overhead Cost Variances, and Management Control Fixed manufacturing overhead variance analysis The Sourdough Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. The Sourdough Bread Company allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. The following is some budget data for the Sourdough Bread Company for 2020. Direct manufacturing labor use 0.02 hours per baguette Fixed manufacturing overhead $3.00 per direct manufacturing labor-hour The following is additional information for the Sourdough Bread Company for the year ended December 31, 2020: Planned (budgeted) output 3,100,000 baguettes Actual production 2,600,000 baguettes Budgeted direct manufacturing labor 62,000 hours Actual direct manufacturing labor 46,800 hours Actual fixed manufacturing overhead $294,000 2. Is fixed overhead underallocated or overallocated? By what amount? a. Use the ABS function when calculating the underallocated or overallocated amount. (Always use cell references and formulas where appropriate to receive full credit. If you copy/paste from the Instructions tab you will be marked wrong.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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| Flexible Budgets, |
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| Fixed manufacturing overhead |
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| The Sourdough Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. The Sourdough Bread Company allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. The following is some budget data for the Sourdough Bread Company for 2020. | |||||
| Direct manufacturing labor use | 0.02 | hours per baguette | |||
| Fixed manufacturing overhead | $3.00 | per direct manufacturing labor-hour | |||
| The following is additional information for the Sourdough Bread Company for the year ended December 31, 2020: | |||||
| Planned (budgeted) output | 3,100,000 | baguettes | |||
| Actual production | 2,600,000 | baguettes | |||
| Budgeted direct manufacturing labor | 62,000 | hours | |||
| Actual direct manufacturing labor | 46,800 | hours | |||
| Actual fixed manufacturing overhead | $294,000 |
| 2. Is fixed overhead underallocated or overallocated? By what amount? | ||||||
| a. Use the ABS function when calculating the underallocated or overallocated amount. | ||||||
| (Always use cell references and formulas where appropriate to receive full credit. If you copy/paste from the Instructions tab you will be marked wrong.) |
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