Variable manufacturing overhead variance analysis. The French Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories, direct materials and direct manufacturing labour. Variable manufacturing overhead is allocated to products based on standard direct manufacturing labour-hours. Baguettes are baked in batches of 100 loaves. Following is some pertinent data for the French Bread Company:

Direct manufacturing labour use 2.00 hours per batch Variable manufacturing overhead $12.00 per direct labour-hour The French Bread Company recorded the following additional data for the year ended December 31, 2007:

Planned (budgeted) output Actual production Direct manufacturing labour Actual variable MOH Required 1. What is the denominator used for allocating manufacturing overhead (i.e., how many direct manufacturing labour-hours is French Bread budgeting for)?

2. Prepare a complete analysis of variable manufacturing overhead (Levels 1 through 3). Use the exhibits in this chapter for reference.

3. Discuss the variances you have calculated. Posit possible explanations for these variances.