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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

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. Following is some budget data for the Brown Bread Company:

Budget data

Direct manufacturing labor use

0.02 hours per baguette

Variable manufacturing overhead

$10.00 per direct manufacturing labor-hour

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

Planned (budgeted) output

3,500,000

baguettes

Actual production

3,200,000

baguettes

Direct manufacturing labor

58,300

hours

Actual variable manufacturing overhead

$781,220

1.

What is the denominator level used for allocating variable manufacturingoverhead? (That is, for how many direct manufacturing labor-hours is

Brown Bread budgeting?)

2.

Prepare a variance analysis of variable manufacturing overhead.

3.

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

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