The Brown 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.

The Brown 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 labor-hour. Actual fixed manufacturing overhead incurred during the year was $290,000.

Read the requirements3.

Requirement 1. Prepare a variance analysis of fixed manufacturing overhead cost.

Begin by completing the table below for the fixed manufacturing overhead that will be used to calculate the variances.

		Same Budgeted
		Lump Sum
	Actual Costs	Regardless of	Flexible	Allocated
	Incurred	Output Level	Budget	Overhead
Fixed MOH

Now complete the 4-variance analysis using the amounts you calculated above. (If no variance exists leave the dollar value blank. Label the variance as favorable (F), unfavorable (U) or never a variance (N).)

4-Variance	Spending		Efficiency		Production-Volume
Analysis	Variance		Variance		Variance
Fixed MOH		(1)		(2)		(3)

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

Fixed manufacturing overhead is

(4)

by

.

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

The production-volume variance captures the difference between

(5)

Brown

Bread Company's spending variance means that the actual aggregate of fixed costs

(6)

the budget amount. For example, monthly leasing rates for baguette-making machines may have

(7)

those in the budget.

1: Data Table

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

2: Data Table

Planned (budgeted) output	3,300,000 baguettes
Actual production	2,900,000 baguettes
Direct manufacturing labor	52,000 hours
Actual variable manufacturing overhead	$681,200

3: Requirements

1.	Prepare a variance analysis of fixed manufacturing overhead cost.
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.