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

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.

  • CreatedJanuary 15, 2015
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