Variable manufacturing overhead variance analysis. The Sourdough 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 Sourdough Bread Company:
Direct manufacturing labor use
0.02 hours per baguette
Variable manufacturing overhead
$10.00 per direct manufacturing labor-hour
The Sourdough Bread Company provides the following additional data for the year ended December 31, 2017:
Planned (budgeted) output
3,100,000 baguettes
Actual production
2,600,000 baguettes
Direct manufacturing labor
46,800 hours
Actual variable manufacturing overhead
$617,760
Required:
How many direct manufacturing labor-hours is Sourdough Bread budgeting and Prepare a variance analysis of variable manufacturing overhead.
Discuss the variances you have calculated and give possible explanations for them.
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