Variable costs Rate per Direct Labor Hour Annual Fixed Costs (a) Prepare a month
ID: 2482749 • Letter: V
Question
Variable costs
Rate per Direct
Labor Hour
Annual Fixed Costs
(a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 37,300 to 51,400 direct labor hours. Use increments of 4,700 direct labor hours. (List variable costs before fixed costs.)
(b) 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 manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed a budgetary control system for 2017. 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 $42,000 Indirect materials 0.54 Depreciation 19,080 Factory utilities 0.34 Insurance 13,920 Factory repairs 0.24 Rent 22,920The master overhead budget was prepared on the expectation that 475,900 direct labor hours will be worked during the year. In June, 39,200 direct labor hours were worked. At that level of activity, actual costs were as shown below.
Variable—per direct labor hour: indirect labor $0.47, indirect materials $0.51, factory utilities $0.36, and factory repairs $0.29.
Fixed: same as budgeted.
Explanation / Answer
Overhead Flexible budget Indirect labor 209396 Indirect materials 256986 Factory utilities 161806 Factory repairs 114216 Supervision 42000 Depreciation 19080 Insurance 13920 Rent 22920 Total cost 840324 b. Actual results Indirect labor 221088 Indirect materials 239904 Factory utilities 169344 Factory repairs 136416 Supervision 42000 Depreciation 19080 Insurance 13920 Rent 22920 864672 Difference with budget 24348
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