=+12-18 KK Variable manufacturing overhead variance analysis OBJECTIVES 2, 3 The French Bread Company bakes baguettes for distribution to upmarket grocery stores. The company has two direct cost categories:

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

Direct manufacturing labour use 0.02 hours per baguette Variable manufacturing overhead $10.00 per direct manufacturing labour-hour The French Bread Company provides the following additional data for the year ended 31 December 2014:

Planned (budgeted) output 3 200 000 baguettes Actual production 2 800 000 baguettes Direct manufacturing labour 50 400 hours Actual variable manufacturing overhead $680 400 Required 1 What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many direct manufacturing labour-hours is the French Bread Company budgeting?)

2 Prepare a variance analysis of variable manufacturing overhead. Use Figure 12-4 (p. 482) for reference.

3 Discuss the variances you have calculated and give possible explanations for them.