8-18 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 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:

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

The French Bread Company provides the following additional data for the year ended December 31, 2012:

Planned (budgeted) output 3,200,000 baguettes Actual production 2,800,000 baguettes Direct manufacturing labor 50,400 hours Actual variable manufacturing overhead $680,400

1. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how Required many direct manufacturing labor-hours is French Bread budgeting?) 2. Prepare a variance analysis of variable manufacturing overhead. Use Exhibit 8-4 (p. 277) for reference. 3. Discuss the variances you have calculated and give possible explanations for them.

8-19 Fixed manufacturing overhead variance analysis (continuation of 8-18). The French Bread Company also allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. For 2012, fixed manufacturing overhead was budgeted at $4.00 per direct manufacturing labor-hour. 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 (p. 277) as a guide. Required 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.