The French 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 French Bread Company:

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

1. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many direct manufacturing labor-hours is French Bread budgeting?)
2. Prepare a variance analysis of variable manufacturing overhead. Use Exhibit 8-4 (page 324) for reference.

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

Transcribed Image Text:

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