Chapter 8, Problem 8.23E

Variable 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. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labor-hours. Following is some budget data for the Sourdough Bread Company:

Direct manufacturing labor use	0.02 hours per baguette
Variable manufacturing overhead	$10.00 per direct manufacturing labor-hour

The Sourdough Bread Company provides the following additional data for the year ended December 31, 2017:

Planned (budgeted) output	3,100,000 baguettes
Actual production	2,600,000 baguettes
Direct manufacturing labor	46,800 hours
Actual variable manufacturing overhead	$617,760

1. A. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many direct manufacturing labor-hours is Sourdough Bread budgeting?)

  Required

1. B. Prepare a variance analysis of variable manufacturing overhead. Use Figure 8-4 (page 304) for reference.
2. C. Discuss the variances you have calculated and give possible explanations for them.