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Part $1$

The Roti Bread Company bakes baguettes for distribution to upscale grocery stores. The 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. Following is some budget data for the Roti Bread Company:

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The Roti Bread Company provides the following additional data for the year ended December $31$:

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Part $1$

Requirement $1.$ What is the denominator level used for allocating variable manufacturing overhead? $($That is$,$ for how many direct manufacturing labour$-$hours is Roti Bread budgeting?$)$

The denominator level is

enter your response here hours.

Part $2$

Requirement $2.$ Prepare a variance analysis of variable manufacturing overhead.

Begin by calculating the following amounts for the variable overhead that will be used to calculate the variances.

Actual Costs Incurred

Actual Input Budgeted Rate

Flexible Budget

Allocated Overhead

Variable MOH

Part $3$

Now, complete the $4-$variance analysis using the amounts you calculated above. $($If no variance exists, leave the dollar value blank. Label the variance as favourable $($F$),$ unfavourable $($U$)$ or never a variance $($N$).)$

$4-$Variance

Analysis

Spending Variance

Efficiency Variance

Production$-$Volume Variance

Variable MOH

Part $4$

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

The spending variance is

unfavourable

favourable

because variable manufacturing overhead was

enter your response here$\%$

lower

higher

than planned. A possible explanation could be

an increase

a decrease

in energy rates relative to the rate per standard labour?hour assumed in the flexible budget.

Part $5$

The efficiency variance is

favourable

unfavourable

because the actual number of direct manufacturing labour$-$hours required was

higher

lower

than the number of hours in the flexible budget. Labour was

less

more

efficient in producing the baguettes than management had anticipated in the budget. This could occur because of

a decline in

improved

morale in the company, which could result from an increase in wages or an improvement in the compensation scheme.

Part $6$

The flexible$-$budget variance of $

enter your response here is

unfavourable

favourable

because the efficiency variance was

not large enough

large enough

to compensate for the spending variance.

The denominator level ishours.The spending variance isbecause variable manufacturing overhead wasbecause variable manufacturing overhead was$\%\%$than planned.A possible explanation could bein energy rates relative to the rate per standard labour?The efficiency variance isbecause the actual number of direct manufacturing labour$-$hours required wasbecause the actual number of direct manufacturing labour$-$hours required wasthan the number of hours in the flexible budget.Labour wasefficient in producing the baguettes than management had anticipated in the budget.This could occur because ofmorale in the company, which could result from an increase in wages or an improvement in the compensation scheme.The flexible$-$budget variance of $isisbecause the efficiency variance wasbecause the efficiency variance wasto compensate for the spending variance.

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Budget data

Direct manufacturing labour use $0\mathrm{.}02$ hours per baguette

Variable manufacturing overhead $ $10\mathrm{.}00$ per direct manufacturing labour?hour

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