Variable costs Rate per Direct Labor Hour Annual Fixed Costs ZELMER COMPANY Mont

Question

Variable costs

Rate per Direct
Labor Hour

Annual Fixed Costs

ZELMER COMPANY
Monthly Manufacturing Overhead Flexible Budget
Ironing Department
For the Year 2017

ZELMER COMPANY
Ironing Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended June 30, 2017

Difference

Budget

Actual Costs

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

elmer 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 $0.42 Supervision $42,600 Indirect materials 0.50 Depreciation 17,280 Factory utilities 0.33 Insurance 14,640 Factory repairs 0.23 Rent 30,600
The master overhead budget was prepared on the expectation that 481,600 direct labor hours will be worked during the year. In June, 38,400 direct labor hours were worked. At that level of activity, actual costs were as shown below.

Variable—per direct labor hour: indirect labor $0.46, indirect materials $0.48, factory utilities $0.37, and factory repairs $0.28.

Fixed: same as budgeted.

Explanation / Answer

The formula used is

Rate per hour budgeted * (Activity Level / Total Hours budgeted for the year)

Total fixed cost per hour =

Total Cost per hour = 0.22 + Variable costs of $1.48

Hours Activity Level 35100 40000 44900 49800 Direct Labour Direct Labour Hours Direct Material Factory Repars             8,073.00            9,200.00         10,327.00         11,454.00 Factory Utilities           11,583.00         13,200.00         14,817.00         16,434.00 Fixed Costs Indirect Labour           14,742.00         16,800.00         18,858.00         20,916.00 Indirect Material           17,550.00         20,000.00         22,450.00         24,900.00 Total Variable Cost           51,948.00         59,200.00         66,452.00         73,704.00 Depreciation             1,259.40            1,435.22            1,611.03           1,786.84 Insurance             1,066.99            1,215.95            1,364.90           1,513.85 Rent             2,230.19            2,541.53            2,852.87           3,164.20 Supervision             3,104.78            3,538.21            3,971.64           4,405.07 Total Fixed Cost             7,661.36            8,730.90            9,800.43         10,869.97 Total Cost           59,609.36         67,930.90         76,252.43         84,573.97

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.