The Sourdough Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. The Sourdough Bread Company allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours. For 2020, fixed manufacturing overhead was budgeted at $3.00 per direct manufacturing labor-hour. Actual fixed manufacturing overhead incurred during the year was $294,000.

Question content area top right

Part 1

The following is some budget data for the Sourdough Bread Company for 2020 and additional infomation for the year ended Decmeber 31, 2020:

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

Planned (budgeted) output	3,100,000 baguettes
Actual production	2,600,000 baguettes
Direct manufacturing labor	46,800 hours
Actual variable manufacturing overhead	$ 617,760

Read the 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.