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. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labor-hours. Following is some budget data for the Sourdough Bread Company (Click the icon to view the budget data) The Sourdough Bread Company provides the following additional data for the year ended December 31, 2017: (Click the icon to view the additional data.) Read the requirements Requirement 1. What is the denominator level used for allocating variable manufacturing overhead? (That is for how many direct manufacturing labor hours is Sourdough Bread budgeting?) The denominator level is 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 Flexible Allocated Incurred Budgeted Rate Budget Overhead Variable 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 Variable MOH (2) (3) Requirement 3. Discuss the variances you have calculated and give possible explanations for them. The spending variance explanation could be a(n) because variable manufacturing overhead -than planned. A was % (5) possible in energy rates relative to the rate per standard labor-hour assumed in the flexible budget. (6) (8) The efficiency variance is (7) - because the actual number of direct manufacturing labor-hours required was than the number of hours in the flexible budget. Labor was (9) efficient in producing the baguettes than management had anticipated in the budget. This could occur because of (10) - morale in the company, which could result from an increase in wages or an improvement in the compensation scheme. is (11) because the efficiency variance was (12) to The flexible-budget variance of compensate for the spending variance. 1: Data Table Direct manufacturing labor use Variable manufacturing overhead 0.02 hours per baguette $10.00 per direct manufacturing labor-hour 2: Data Table 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 3: Requirements 1. What is the denominator level used for allocating variable manufacturing overhead? (That is for how many dired manufacturing labor-hours is Sourdough Bread budgeting?) 2. Prepare a variance analysis of variable manufacturing overhead. 3. Discuss the variances you have calculated and give possible explanations for them. (2) (1) O o (3) o (4) O favorable O unfavorable (5) O O higher lower (6) O decrease O increase 000 (8) O higher (9) Oless (7) O favorable O unfavorable (10) O a decline in improved ooo (11) O O favorable O unfavorable O lower O more (12) O large enough not large enough
