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. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labor- hours. Following is some budget data for the Whole Bread Company:

Direct manufacturing labor use........ 0.02 hours per baguette

Variable manufacturing overhead.......$ 10.00 per direct manufacturing labor- hour

The Whole Bread Company provides the following additional data for the year ended December 31, 2012:

Planned (budgeted) output .......3,000,000 baguettes

Actual production......... 2,400,000 baguettes

Direct manufacturing labor....... 42,000 hours

Actual variable manufacturing overhead .....$ 558,600

Required

1. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many direct manufacturing labor- hours is Whole Bread budgeting?)

2. Prepare a variance analysis of variable manufacturing overhead. Use Exhibit 13- 6 (page 559) for reference.

3. Discuss the variances you have calculated and give possible explanations for them.