Save Homework: chapter 8 Score: 0 of 30 pts E8-18 (similar to) 3 of 6 (1 complet

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Save Homework: chapter 8 Score: 0 of 30 pts E8-18 (similar to) 3 of 6 (1 complete) HW Score: 0 89%, 1.33 of 150 pts Question Hep * The Rye Bread Company bakes baguettes for distrbution 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 Rye Bread Company EEB (Click the icon to view the budget data ) The Rye Bread Company provides the following additional data for the year onded December 31, 2014 (Click the icon to view the addional data.) Read the requirements Requirement 1. What is the denominator level used for allocating variable manufacturing overhead? (That is, for how many drect manufacturing labor-hours is Rye Bread budgeting?) The denominator level is hours Data Table Direct manufacturing labor use Variable manufacturing overhead S 10.00 per direct manufacturing labor-hour 0 02 hours per baguette Print D Done Data Table Requirements - 1. What is the denominator level used for allocating variable manufac turing Planned (budgeted) output Actual production Direct manufacturing labor Actual variable manufacturing overhead $576 200 3,000,000 baguettes 2.400,000 baguettes 43,000 hours overhead? (That is, for how many direct manufacturing labor-hours is Rye Bread budgeting?) 2. Prepare a variance analysis of variable manufacturing overhead 3. Discuss the variances you have calculated and give possible explanations for them. Print Done Print Done Clear All Check Answer

Explanation / Answer

1 Denominator level used for allocating variable manufacturing overheads: 60000 hours Planned (budgeted) output = 3,000,000 baguettes Direct manufacturing labour = 0.02 hours per baguette Total budgeted direct manufacturing labor hours = 3,000,000 x 0.02 = 60000 hours 2 Variable manufacturing overhead variance = Budgeted variable manufacturing overheads - Actual variable manufacturing overheads = $600000 - $576200 = $23800 Favorable Budgeted variable manufacturing overheads = 60000 hours x $10 per direct manufacturing labor hour = $600000 The favorable variable manufacturing overhead variance of $23800 can be bifurcated into a spending and volume variance as under: Planned variable manufacturing overheads (at 3,000,000 volume) = 60000 x $10 = $600000 Actual variable manufacturing overheads (at 2,400,000 volume) = $576200 Flexed variable manufacturing overheads (at 2,400,000 volume) = 2,400,000 x 0.02 hours x $10 = $480000 Spending variance = Actual - Flexed = $576200 - $480000 = $96200 Unfavorable Volume variance = Budgeted - Flexed = $600000 - $480000 = $120000 Favorable 3 Thus, it is seen that the variance is favorable as a result of lower volumes of activity than those budgeted. At the same level of activity, the variance is actually unfavorable.

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