The SourdoughSourdough 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 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. What is the denominator level used for allocating variable manufacturing` overhead? (That is, for how many direct manufacturing labor-hours is Sourdough Bread budgeting?)
2. Prepare a variance analysis of variable manufacturing overhead.
3. Discuss the variances you have calculated and give possible explanations for them.