French Bread Company has two direct-cost categories: direct materials and direct manufacturing labour. Variable manufacturing overhead is

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French Bread Company has two direct-cost categories: direct materials and direct manufacturing labour. Variable manufacturing overhead is allocated to products on the basis of standard direct manufacturing labour-hours (DMLH).

Baguettes are baked in batches of 100 loaves. Following are some pertinent data for French Bread Company:

Direct manufacturing labour use..............2.00 DMLH per batch

Variable manufacturing overhead..................$4.00 per DMLH

French Bread Company recorded the following additional data for the year ended December 31, 2015:

Planned (budgeted) output......................3,840,000 baguettes

Actual production.................................3,360,000 baguettes

Direct manufacturing labour...........................50,400 DMLH

Actual variable MOH.........................................$326,400

Required

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

2. Prepare a variance analysis of variable manufacturing overhead. Use Exhibit 8-5 for reference.

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

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Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0133138443

7th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham

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