Zelmer Company manufactures tablecloths. Sales have grown rapidly over the past
ID: 2460039 • Letter: Z
Question
Zelmer Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed a budgetary control system for 2014. The following data were used in developing the master manufacturing overhead budget for the Ironing Department, which is based on an activity index of direct labor hours.
Variable costs
Rate per Direct
Labor Hour
Annual Fixed Costs
Indirect labor
$0.44
Supervision
$41,076
Indirect materials
0.53
Depreciation
20,340
Factory utilities
0.32
Insurance
15,108
Factory repairs
0.22
Rent
28,812
The master overhead budget was prepared on the expectation that 478,200 direct labor hours will be worked during the year. In June, 37,610 direct labor hours were worked. At that level of activity, actual costs were as shown below.
Variable—per direct labor hour: indirect labor $0.48, indirect materials $0.51, factory utilities $0.34, and factory repairs $0.26.
Fixed: same as budgeted.
Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2014, assuming production levels range from 36,400 to 50,500 direct labor hours. Use increments of 4,700 direct labor hours. (List variable costs before fixed costs.)
ZELMER COMPANY
Monthly Manufacturing Overhead Flexible Budget
Ironing Department
For the Year 2014
Activity Level Depreciation Direct Labor Direct Labor Hours Direct Materials Factory Repairs Factory Utilities Fixed Costs Indirect Labor Indirect Materials Insurance Rent Supervision Total Costs Total Fixed Costs Total Variable Costs Variable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
$
$
$
$
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
$
$
$
$
Prepare a budget report for June comparing actual results with budget data based on the flexible budget. (List variable costs before fixed costs.)
ZELMER COMPANY
Ironing Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended June 30, 2014
Difference
Budget
Actual Costs
Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)
Activity Level Depreciation Direct Labor Direct Labor Hours Direct Materials Factory Repairs Factory Utilities Fixed Costs Indirect Labor Indirect Materials Insurance Rent Supervision Total Costs Total Fixed Costs Total Variable Costs Variable Costs
Activity Level Depreciation Direct Labor Direct Labor Hours Direct Materials Factory Repairs Factory Utilities Fixed Costs Indirect Labor Indirect Materials Insurance Rent Supervision Total Costs Total Fixed Costs Total Variable Costs Variable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
$
$
$
F U N
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
F U N
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
F U N
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
F U N
Activity Level Depreciation Direct Labor Direct Labor Hours Direct Materials Factory Repairs Factory Utilities Fixed Costs Indirect Labor Indirect Materials Insurance Rent Supervision Total Costs Total Fixed Costs Total Variable Costs Variable Costs
F U N
Activity Level Depreciation Direct Labor Direct Labor Hours Direct Materials Factory Repairs Factory Utilities Fixed Costs Indirect Labor Indirect Materials Insurance Rent Supervision Total Costs Total Fixed Costs Total Variable Costs Variable Costs
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
F U N
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
F U N
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
F U N
Activity LevelDepreciationDirect LaborDirect Labor HoursDirect MaterialsFactory RepairsFactory UtilitiesFixed CostsIndirect LaborIndirect MaterialsInsuranceRentSupervisionTotal CostsTotal Fixed CostsTotal Variable CostsVariable Costs
F U N
Activity Level Depreciation Direct Labor Direct Labor Hours Direct Materials Factory Repairs Factory Utilities Fixed Costs Indirect Labor Indirect Materials Insurance Rent Supervision Total Costs Total Fixed Costs Total Variable Costs Variable Costs
F U N
Activity Level Depreciation Direct Labor Direct Labor Hours Direct Materials Factory Repairs Factory Utilities Fixed Costs Indirect Labor Indirect Materials Insurance Rent Supervision Total Costs Total Fixed Costs Total Variable Costs Variable Costs
$
$
$
F U N
State the formula for computing the total budgeted costs for the Ironing Department. (Round variable cost per unit to 2 decimal places, e.g. 1.56.)
The formula
=
$ + total variable costs of $ per direct labor hour.
Variable costs
Rate per Direct
Labor Hour
Annual Fixed Costs
Indirect labor
$0.44
Supervision
$41,076
Indirect materials
0.53
Depreciation
20,340
Factory utilities
0.32
Insurance
15,108
Factory repairs
0.22
Rent
28,812
Explanation / Answer
1.
ZELMER COMPANY
Monthly Manufacturing Overhead Flexible Budget
Ironing Department
For the Year 2014
Activity level
Direct labor hours
36400
4110
45800
50500
Variable costs
Indirect labor ($.44)
$16,016.00
$18,084.00
$20,152.00
$22,220.00
Indirect materials ($.53)
$19,292.00
$21,783.00
$24,274.00
$26,765.00
Factory utilities ($.32)
$11,648.00
$13,152.00
$14,656.00
$16,160.00
Factory repairs ($.22)
$8,008.00
$9,042.00
$10,076.00
$11,110.00
Total variable costs ($1.51)
$54,964.00
$62,061.00
$69,158.00
$76,255.00
Fixed costs
Supervision
$3,423.00
$3,423.00
$3,423.00
$3,423.00
Depreciation
$1,695.00
$1,695.00
$1,695.00
$1,695.00
Insurance
$1,259.00
$1,259.00
$1,259.00
$1,259.00
Rent
$2,401.00
$2,401.00
$2,401.00
$2,401.00
Total fixed costs
$8,778.00
$8,778.00
$8,778.00
$8,778.00
Total costs
$63,742.00
$70,839.00
$77,936.00
$85,033.00
2.
ZELMER COMPANY
Ironing Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended June 30, 2014
Difference
Budget
Actual Costs
Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)
Direct labor hours (DLH)
37610
37610
Variable costs
Indirect labor
$16,548.40
$18,052.80
$1,504.40 U
Indirect materials
$19,933.30
$19,181.10
$752.20 F
Factory utilities
$12,035.20
$12,787.40
$752.20 U
Factory repairs
$8,274.20
$9,778.60
$1,504.40 U
Total variable costs
$56,791.10
$59,799.90
$3,008.80 U
Fixed costs
Supervision
$3,423.00
$3,423.00
$0.00 N
Depreciation
$1,695.00
$1,695.00
$0.00 N
Insurance
$1,259.00
$1,259.00
$0.00 N
Rent
$2,401.00
$2,401.00
$0.00 N
Total fixed costs
$8,778.00
$8,778.00
$0.00 N
Total costs
$65,569.10
$68,577.90
$3,008.80 U
3.
Total budgeted cost for the ironing department = $8,778 + Total variable cost of $1.51 per direct labour hour
Activity level
Direct labor hours
36400
4110
45800
50500
Variable costs
Indirect labor ($.44)
$16,016.00
$18,084.00
$20,152.00
$22,220.00
Indirect materials ($.53)
$19,292.00
$21,783.00
$24,274.00
$26,765.00
Factory utilities ($.32)
$11,648.00
$13,152.00
$14,656.00
$16,160.00
Factory repairs ($.22)
$8,008.00
$9,042.00
$10,076.00
$11,110.00
Total variable costs ($1.51)
$54,964.00
$62,061.00
$69,158.00
$76,255.00
Fixed costs
Supervision
$3,423.00
$3,423.00
$3,423.00
$3,423.00
Depreciation
$1,695.00
$1,695.00
$1,695.00
$1,695.00
Insurance
$1,259.00
$1,259.00
$1,259.00
$1,259.00
Rent
$2,401.00
$2,401.00
$2,401.00
$2,401.00
Total fixed costs
$8,778.00
$8,778.00
$8,778.00
$8,778.00
Total costs
$63,742.00
$70,839.00
$77,936.00
$85,033.00
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