Question
The Rye 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 Rye 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 Rye Bread Company:
Direct manufacturing labor use | 0.02 | hours per baguette |
Variable manufacturing overhead | $10.00 | per direct manufacturing labor-hour |
The Rye Bread Company provides the following additional data for the year ended December 31, 2014:
Planned (budgeted) output | 3,700,000 | baguettes |
Actual production | 2,500,000 | baguettes |
Direct manufacturing labor | 44,700 | hours |
Actual variable manufacturing overhead | $594,510 |
Requirments
1. | What is the denominator level used for allocating variable manufacturingoverhead? (That is, for how many direct manufacturing labor-hours is Rye Bread budgeting?) |
2. | Prepare a variance analysis of variable manufacturing overhead. |
3. | Discuss the variances you have calculated and give possible explanations for them. |
Requirement 1. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many direct manufacturing labor-hours is Rye
Bread budgeting?)
The denominator level is _ hours.
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