Variable costs Rate per Direct Labor Hour Annual Fixed Costs ZELMER COMPANY Mont
ID: 2475999 • Letter: V
Question
Variable costs
Rate per Direct
Labor Hour
Annual Fixed Costs
ZELMER COMPANY
Monthly Manufacturing Overhead Flexible Budget
Ironing Department
For the Year 2014
LINK TO TEXT
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)
LINK TO TEXT
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 $0.43 Supervision $45,312 Indirect materials 0.53 Depreciation 19,764 Factory utilities 0.35 Insurance 13,836 Factory repairs 0.21 Rent 23,664The master overhead budget was prepared on the expectation that 482,600 direct labor hours will be worked during the year. In June, 38,710 direct labor hours were worked. At that level of activity, actual costs were as shown below.
Variable—per direct labor hour: indirect labor $0.45, indirect materials $0.52, factory utilities $0.38, and factory repairs $0.26.
Fixed: same as budgeted.
Explanation / Answer
ZELMER COMPANY MONTHLY MANUFACTURING OVERHEAD FLEXIBLE BUDGET IRONING DEPARTMENT Cost Per Hr. Direct labor hours 37200 42400 47600 52800 Variable Costs: Indirect labor $ 0.43 $ 15,996.00 $ 18,232.00 $ 20,468.00 $ 22,704.00 Indirect material $ 0.53 $ 19,716.00 $ 22,472.00 $ 25,228.00 $ 27,984.00 Factory utilities $ 0.35 $ 13,020.00 $ 14,840.00 $ 16,660.00 $ 18,480.00 Factory repairs $ 0.21 $ 3,359.16 $ 3,828.72 $ 4,298.28 $ 4,767.84 Total variable cost $ 1.52 $ 52,091.16 $ 59,372.72 $ 66,654.28 $ 73,935.84 Fixed cost: Supervision $ 3,776.00 $ 3,776.00 $ 3,776.00 $ 3,776.00 Depreciation $ 1,647.00 $ 1,647.00 $ 1,647.00 $ 1,647.00 Insurance $ 1,153.00 $ 1,153.00 $ 1,153.00 $ 1,153.00 Rent $ 1,972.00 $ 1,972.00 $ 1,972.00 $ 1,972.00 Total fixed cost $ 8,548.00 $ 8,548.00 $ 8,548.00 $ 8,548.00 Total cost $ 60,639.16 $ 67,920.72 $ 75,202.28 $ 82,483.84 (Total cost =Total variable cost+Total fixed cost of the month) ZELMER COMPANY IRONING DEPARTMENT Manufacturing Overhead Flexible Budget Report For the month ended June 30, 2014 Budget Actual Difference Direct labor hours Budgeted(482,600/12) 40217 38710 Variable Costs: Budgeted per hour Actual rate per hour Indirect labor $ 0.43 0.45 $ 17,293.17 $ 17,419.50 $ (126.33) U Indirect material $ 0.53 0.52 $ 21,314.83 $ 20,129.20 $ 1,185.63 F Factory utilities $ 0.35 0.38 $ 14,075.83 $ 14,709.80 $ (633.97) U Factory repairs $ 0.21 0.26 $ 8,445.50 $ 10,064.60 $ (1,619.10) U Total variable cost $ 61,129.33 $ 62,323.10 $ (1,193.77) U Fixed cost: Supervision $ 3,776.00 $ 3,776.00 $ - N Depreciation $ 1,647.00 $ 1,647.00 $ - N Insurance $ 1,153.00 $ 1,153.00 $ - N Rent $ 1,972.00 $ 1,972.00 $ - N Total Fixed Cost $ 8,548.00 $ 8,548.00 $ - N Total budgeted cost for the Ironing department for the month of June=Total variable cost+total fixed cost =($61,129.33+$8,548)=$69,677.33 Total budgeted cost per direct labor hour=Total budgeted cost/total budgeted hours '=$69,677.33/40,217 '=$1.73
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