Problem 10-2A (Part Level Submission) Zelmer Company manufactures tablecloths. S

Question

Problem 10-2A (Part Level Submission) 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. Rate per Direct Labor Hour Annual Fixed Costs Variable costs Indirect labor Indirect materials Factory utilities Factory repairs 47,040 20,280 12,480 30,000 $0.40 Supervision 0.54 Depreciation 0.30 Insurance 0.23 Rent The master overhead budget was prepared on the expectation that 482,200 direct labor hours will be worked during the year. In June, 43,100 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 $0.51, factory utilities $0.33, and factory repairs ??2.221 Fixed: same as budgeted. ? (a) & (b) (a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 40,900 to 53,500 direct labor hours. Use increments of 4,200 direct labor hours. (List variable costs before fixed costs. ZELMER COMPANY Monthly Manufacturing Overhead Flexible Budget Ironing Department For the Year 2017

Explanation / Answer

Monthly Manufacturing Overhead Flexibe Budget Rate Activity Level Direct labor hours 40,900 45,100 49,300 53,500 Variable costs 0.4 Indirect labor 16360 18040 19720 21400 0.54 Indirect materials 22086 24354 26622 28890 0.3 Factory utilities 12270 13530 14790 16050 0.23 Factory repairs 9407 10373 11339 12305 1.47 Total variable costs 60123 66297 72471 78645 Fixed costs: Supervision 3920 3920 3920 3920 Depreciation 1690 1690 1690 1690 Insurance 1040 1040 1040 1040 Rent 2500 2500 2500 2500 total fixed costs 9150 9150 9150 9150 total costs 69273 75447 81621 87795 b) Manufacturing Overhead Flexible Budget Budgetat Actual cost Favorable F actual Unfavourable U Activity Level 43,100 43,100 Direct labor hours Variable costs 0.42 Indirect labor 17240 18102 862 U 0.51 Indirect materials 23274 21981 1293 F 0.33 Factory utilities 12930 14223 1293 U 0.28 Factory repairs 9913 12068 2155 U 1.54 Total variable costs 63357 66374 3017 Fixed costs: Supervision 3920 3920 0 Depreciation 1690 1690 0 Insurance 1040 1040 0 Rent 2500 2500 0 total fixed costs 9150 9150 0 total costs 72507 75524 3017 U

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