The Best of Italy Pizza Restaurant make pizza for in-house and on-line customers. 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 Best of Italy Pizza: Direct manufacturing labor use Variable manufacturing overhead 0.42 hours per pizza $4.00 per direct manufacturing labor-hour The Best of Italy Pizza Company provides the following additional data for the year ended December 31, 2019: Planned (budgeted) output Actual production Direct manufacturing labor Actual variable manufacturing overhead 54,000 pizza 43,200 pizza 14,429 hours $86,000 The Best of Italy Company also allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. For 2019, fixed manufacturing overhead was budgeted at $3.00 per direct manufacturing labor-hour. Actual fixed manufacturing overhead incurred during the year was $73,000. Required: 1. Prepare a variance analysis of variable manufacturing overhead. 2. Discuss the variances you have calculated and give possible explanations for them. 3. Prepare a variance analysis of fixed manufacturing overhead cost. 4. Is fixed overhead under-allocated or over-allocated? By what amount? 5. Comment on your results. Discuss the variances and explain what may be driving them. The Best of Italy Pizza Restaurant make pizza for in-house and on-line customers. 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 Best of Italy Pizza: Direct manufacturing labor use Variable manufacturing overhead 0.42 hours per pizza $4.00 per direct manufacturing labor-hour The Best of Italy Pizza Company provides the following additional data for the year ended December 31, 2019: Planned (budgeted) output Actual production Direct manufacturing labor Actual variable manufacturing overhead 54,000 pizza 43,200 pizza 14,429 hours $86,000 The Best of Italy Company also allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. For 2019, fixed manufacturing overhead was budgeted at $3.00 per direct manufacturing labor-hour. Actual fixed manufacturing overhead incurred during the year was $73,000. Required: 1. Prepare a variance analysis of variable manufacturing overhead. 2. Discuss the variances you have calculated and give possible explanations for them. 3. Prepare a variance analysis of fixed manufacturing overhead cost. 4. Is fixed overhead under-allocated or over-allocated? By what amount? 5. Comment on your results. Discuss the variances and explain what may be driving them
