Zelmer Company manufactures tablecloths. Sales have grown rapidly over the past
ID: 2516845 • 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 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
The master overhead budget was prepared on the expectation that 482,500 direct labor hours will be worked during the year. In June, 42,400 direct labor hours were worked. At that level of activity, actual costs were as shown below.
Variable—per direct labor hour: indirect labor $0.42, indirect materials $0.50, factory utilities $0.35, and factory repairs $0.25.
Fixed: same as budgeted.
(a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 38,400 to 54,600 direct labor hours. Use increments of 5,400 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.)
State the formula for computing the total budgeted costs for the Ironing Department. (Round variable cost per unit to 2 decimal places, e.g. 1.55.)
Variable costs
Rate per Direct
Labor Hour
Annual Fixed Costs
Indirect labor $0.40 Supervision $42,720 Indirect materials 0.52 Depreciation 18,360 Factory utilities 0.32 Insurance 16,800 Factory repairs 0.20 Rent 27,480 Problesm 24-2A oerhead ?-for the boring Depatinert, which-based on an abity nde" ofdeed labor hours. Flxed Costs Indirect maten Factory utisties Factory repairs 10.40 Supervision $42,720 32 Depreation 1.60 0.32 Insurance 0.20 Rent Fxed: same as budgetedExplanation / Answer
Monthly Manufacring Overhead Flexible Budget Production levles ( in No. of Hours)) Variable costs Per hour rate 38400 43800 49200 54600 Indirect labour 0.4 $15,360.00 $17,520.00 $19,680.00 $21,840.00 Indirect material 0.52 $19,968.00 $22,776.00 $25,584.00 $28,392.00 Factory utilities 0.32 $12,288.00 $14,016.00 $15,744.00 $17,472.00 Factory repairs 0.2 $7,680.00 $8,760.00 $9,840.00 $10,920.00 Fixed costs Supervision $42,720.00 $42,720.00 $42,720.00 $42,720.00 Depreciation $18,360.00 $18,360.00 $18,360.00 $18,360.00 Insurance $16,800.00 $16,800.00 $16,800.00 $16,800.00 Rent $27,480.00 $27,480.00 $27,480.00 $27,480.00 Total $160,656.00 $168,432.00 $176,208.00 $183,984.00 Answer for question b: Production levles 42400 Hour Budget Actuals Variable costs Per hour rate (A)*(B) Per hour rate Amount Indirect labour 0.4 $16,960.00 0.42 $17,808.00 Indirect material 0.52 $22,048.00 0.50 $21,200.00 Factory utilities 0.32 $13,568.00 0.35 $14,840.00 Factory repairs 0.2 $8,480.00 0.25 $10,600.00 Fixed costs Supervision $42,720.00 $42,720.00 Depreciation $18,360.00 $18,360.00 Insurance $16,800.00 $16,800.00 Rent $27,480.00 $27,480.00 Total $166,416.00 $169,808.00 Formula for computing the total bugeted costs for ironing department is as follows: Fixed costs+Total varible costs of $ per direct labour hour Fixed costs =$105360 Variable Cost= $1.44 /Hour hence, formula for total budgeted costs of ironing department =$105360+$1.44 per direct labour hour.
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