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, 2013:

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.

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