Question
The Whole Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. The
The Whole Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-cost categories: direct materials and direct manufacturing labor. The Whole Bread Company allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing labor-hours.
The following is some budget data for the Whole Bread Company for 2017 and additional infomation for the year ended Decmeber 31, 2017:
Budget data
Direct manufacturing labor use | 0.02 | hours per baguette |
Fixed manufacturing overhead | $5.00 | per direct manufacturing |
labor-hour |
Additional data
Planned (budgeted) output | 2,900,000 | baguettes |
Actual production | 2,800,000 | baguettes |
Budgeted direct manufacturing labor | 58,000 | hours |
Actual direct manufacturing labor | 50,900 | hours |
Actual fixed manufacturing overhead | $298,000 |
requirements
1. | Prepare a variance analysis of fixed manufacturing overhead cost. Begin by completing a table for the fixed manufacturing overhead that will be used to calculate the variances. |
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. |
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