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The French Bread Company bakes baguettes for distribution to upscale grocery stores

Accounting

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The French Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two? direct-cost categories: direct materials and direct manufacturing labor. The French Bread Company allocates fixed manufacturing overhead to products on the basis of standard direct manufacturing? labor-hours. For 2020?, fixed manufacturing overhead was budgeted at ?$4.00 per direct manufacturing? labor-hour. Actual fixed manufacturing overhead incurred during the year was $289,000.

 

Direct manufacturing labor use: $0.02 hours per baguette

Variable manufacturing overhead: $10:00 per direct manufacturing labor-hour

Planned (budgeted) output: 3,000,000 baguettes

Actual production: 2,700,000 baguettes

Direct manufacturing labor: 48,400 hours

Actual variable manufacturing overhead: $634,040

 

1.

Prepare a variance analysis of fixed manufacturing overhead cost.

2.

Is fixed overhead underallocated or? overallocated? By what? amount?

3.

Comment on your results. Discuss the variances and explain what may be driving them.

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