The Rye Bread Company provides the following additional data for the year ended December 31, 2020: - Requirements 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?) 2. Prepare a variance analysis of variable manufacturing overhead. 3. Discuss the variances you have calculated and give possible explanations for them. 3,800,000 baguettes 2,500,000 baguettes Planned (budgeted) output Actual production Direct manufacturing labor Actual variable manufacturing overhead 44,500 hours $591,850 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: 0.02 hours per baguette Direct manufacturing labor use Variable manufacturing overhead $10.00 per direct manufacturing labor-hour Requirement 1. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many direct manufacturing labor-hours is Brown Bread budgeting?) The denominator level is 64,000 hours. Requirement 2. Prepare a variance analysis of variable manufacturing overhead. Begin by calculating the following amounts for the variable overhead that will be used to calculate the variances. Actual Input Actual Costs X Flexible Allocated Budget Overhead Incurred Budgeted Rate 693,220$ 506,000 $ Variable MOH $ 560,000 $ 560,000 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 Variable MOH 187,220 U 54,000 F N Requirement 3. Discuss the variances you have calculated and give possible explanations for them. 1 The spending variance is unfavorable because variable manufacturing overhead was 37 % higher than planned. A possible explanation could be a(n) increase in energy rates relative to the rate per standard labor-hour assumed in the flexible budget. The efficiency variance is favorable because the actual number of direct manufacturing labor-hours required was lower than the number of hours in the flexible budget. Labor was more efficient in producing the baguettes than management had anticipated in the budget. This could occur because of improved morale in the company, which could result from an increase in wages or an improvement in the compensation scheme. The flexible-budget variance of IS because the efficiency variance was to compensate for the spending variance