The French Bread Company also allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. For 2017, fixed manufacturing overhead was budgeted at \($4.00\) per direct manufacturing laborhour.

Actual fixed manufacturing overhead incurred during the year was \($272,000\).

1. Prepare a variance analysis of fixed manufacturing overhead cost. Use Exhibit 8-4 (page 324) as a guide.

2. Is fixed overhead underallocated or overallocated? By what amount?

3. Comment on your results. Discuss the variances and explain what may be driving them.

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EXHIBIT 8.4 Columnar Presentation of Integrated 4-Variance Analysis: Webb Company for April 2017" PANEL A: Variable (Manufacturing) Overhead Actual Costs Incurred: Actual Input Quantity Actual Rate (1) Actual Input Quantity Budgeted Rate (2) Flexible Budget Budgeted Input Quantity Allowed for Actual Output Budgeted Rate Allocated: Budgeted Input Quantity Allowed for Actual Output Budgeted Rate (4) 10,000 units x $30/hr.) (0.40 hrs./unit x 10,000 units x $30/hr.) (4,000 hrs. x $30/hr.) (4,000 hrs. x $30/hr.) (3) (0.40 hrs./unit (4,500 hrs. x $29/hr.) $130,500 (4,500 hrs. x $30/hr.) $135,000 $120,000 $4,500 F $15,000 U Spending variance Efficiency variance $10,500 U Flexible-budget variance Never a variance Never a variance $120,000 $10,500 U PANEL B: Fixed (Manufacturing) Overhead Underallocated variable overhead [Total variable overhead variance) Actual Costs Incurred (1) Same Budgeted Lump Sum (as in Static Budget) Regardless of Output Level (2) $285,000 $276,000 $9,000 U Spending variance Never a variance $9,000 U Flexible-budget variance Flexible Budget Same Budgeted Lump Sum (as in Static Budget) Regardless of Output Level (3) $276,000 Allocated: Budgeted Input Quantity Allowed for Actual Output Budgeted Rate (4) (0.40 hrs/unit x 10,000 units x $57.50/hr.) $46,000 U (4,000 hrs. x $57.50/hr.) $230,000 Production-volume variance $46,000 U Production-volume variance $55,000 U Underallocated fixed overhead (Total fixed overhead variance) *= favorable effect on operating income; U = unfavorable effect on operating income.