ElizabethHampton_ACG3341-1_Week9 - Exercise818: The French...

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Exercise 8-18: Variable manufacturing overhead variance analysis The French Bread Company bakes baguettes for distribution to upscale grocery stores. The company has two direct-costs 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 French Bread Company: Direct manufacturing labor use 0.02 hours per baguette Variable manufacturing overhead $10.00 per direct manufacturing labor hour The French Bread Company provides the following additional data for the year ended December 31, 2012: Actual production 2,800,000 baguettes Planned (budgeted) output 3,200,000 baguettes Direct manufacturing labor 50,400 hours Actual variable manufacturing overhead $680,400 1 What is the denominator level used for allocating variable manufacturing overhead? (that is for how many direct manufacturing labor hours is French Bread budgeting?) Analysis of variable manufacturing overhead variance 2 Prepare a variance analysis of variable manufacturing overhead. Use Exhibit 8-4 (p.277 for reference. 1. Output Units 2,800,000 2,800,000 (baguettes) 2. Direct manufacturing/ labor-hours 50,400 labor-hours 56,000labor-hours 3. Labor-hours per output unit (2 ÷1) 0.018 labor hours per unit 0.020 labor hours per unit 4. Variable manufacturing overhead costs $680,400 $560,000 5. Variable MOH per labor-hour (4 ÷2) $13.50 MOH labor hour per unit $10 MOH labor hour per unit 6. Variable MOH per output unit (4 ÷1) $0.243 MOH per output unit $0.20 MOH per output unit Actual Costs Incurred Actual Input Flexible Budget: Allocated: Actual Input Quantity Quantity Budgeted Input Quantity Allowed Budgeted Input Quantity Allowed × Actual Rate × Budgeted Rate for Actual Output × Budgeted Rate for Actual Output × Budgeted Rate (50,400 × $13.50) (50,400 × $10) (56,000 × $10) (56,000 × $10) $680,400 $504,000 $560,000 $560,000 $176,400 U $56,000F <--------> <--------> <-----------> Spending variance
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