Problem 10-2A (Part Level Submission) Zelmer Company manufactures tablecloths. S
ID: 2552634 • Letter: P
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 m?nufacturing overhead budget for the Ironing Department, which is based on an activity index of direct labor hours. Rate per Direct Indirect labor Indirect materials Factory utilities Factory repairs 0.44 Supervision 0.55 Depredation 0.32 nsurance 0.24 Rent 541,040 16,200 13,320 30,960 The master overhead budget was prepared on the expectation thet 479,500 direct labor hours will be worked during the year. In June, 37,500 direct labor hours were worked. At that level of activity, ectual costs were as shown below. Variable-per direct labor hour: indirect labor so.47, indirect materials $0.54, factory utilities S0.35, and factory repairs 0.29. Fixed: same as budgeted (a) & (b (a Prepare monthly anufac unng overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 38 300 to 50,900 direct labor hours. Use ncrements of 4,200 d rect labor hours. (List variable costs belore fixed costs. ZELMER COMPANY Overhead Flexible Budget for the Year 2017 (b) Prepsre a budaet report for June compering actual resuts with budget dets besed on the flexible budget. (List variable costs before fixed costs.) ZELMER COMPNY For the Moath Ended June 30, 2017 Favorable Ncither Favorable Actual C Unfavorable State the formula for computing the total budgeted costs for the Ironing Department. (Round variable cost per unit to 2 decimal places, e.g. 1.S5.) The formula is + total vaiable costs of s per direct labor hour.Explanation / Answer
Solution
(a) ZELMER COMPANY
Monthly Manufacturing Overhead Flexible Budget
Ironing Department
For the Year 2017
Activity level
Direct labor hours
Variable costs
Indirect labor ($.44)
Indirect materials ($.55)
Factory utilities ($.32)
Factory repairs ($.24)
Total variable costs ($1.55)
Fixed costs
Supervision
Depreciation
Insurance
Rent
Total fixed costs
Total costs
?38,300
$16,852
?21,065
?12,256
9,192
59,365
??41,040
??16,200
??13,320
30,960
101,520
$160,885
?42,500
$18,700
?23,375
?13,600
10,200
65,875
??41,040
??16,200
??13,320
30,960
101,520
$167,395
?46,700
$20,548
?25,685
?14,944
11,208
72,385
??41,040
??16,200
??13,320
30,960
101,520
$173,905
?50,900
$22,396
?27,995
?16,288
12,216
78,895
??41,040
??16,200
??13,320
30,960
101,520
$180,415
(b) ZELMER COMPANY
Ironing Department
Manufacturing Overhead Flexible Budget Report
For the Month Ended June 30, 2017
Difference
Direct labor hours (DLH)
Variable costs
Indirect labor
Indirect materials
Factory utilities
Factory repairs
Total variable costs
Fixed costs
Supervision
Depreciation
Insurance
Rent
Total fixed costs
Total costs
Budget at
37,500
$16,500 (1)
?20,625 (2)
?12,000 (3)
9,000 (4)
58,125
??41,040
??16,200
??13,320
30,960
101,520
$159,645
Actual Costs
37,500
$17,625 (5)
?20,250 (6)
?13,125 (7)
10,875 (8)
61,875
41,040??16,200
??13,320
30,960
101,520
$163,395
Favorable F
Unfavorable U
$1,125 U
?? 375 F
?? 1,125 U
1,875 U
3,750 U
?? ??0 U
?? ??0 U
?? ??0 U
0 U
0 U
$3,750 U
Budgeted cost
(1) 37,500 X $0.44=$ 16,500
(2) 37,500 X $0.55=$ 20,625
(3) 37,500 X $0.32=$ 12,000
(4) 37,500 X $0.24=$ 9,000
Actual cost
(5) 37,500 X $0.47=$ 17,625
(6) 37,500 X $0.54=$ 20,250
(7) 37,500 X $0.35=$ 13,125
(8) 37,500 X $0.29=$ 10,875
(d) The formula for computing the total budgeted cost for the Ironing department
The formula is = $101,520 fixed costs + total variable costs of $1.55 per direct labor hour.
Activity level
Direct labor hours
Variable costs
Indirect labor ($.44)
Indirect materials ($.55)
Factory utilities ($.32)
Factory repairs ($.24)
Total variable costs ($1.55)
Fixed costs
Supervision
Depreciation
Insurance
Rent
Total fixed costs
Total costs
?38,300
$16,852
?21,065
?12,256
9,192
59,365
??41,040
??16,200
??13,320
30,960
101,520
$160,885
?42,500
$18,700
?23,375
?13,600
10,200
65,875
??41,040
??16,200
??13,320
30,960
101,520
$167,395
?46,700
$20,548
?25,685
?14,944
11,208
72,385
??41,040
??16,200
??13,320
30,960
101,520
$173,905
?50,900
$22,396
?27,995
?16,288
12,216
78,895
??41,040
??16,200
??13,320
30,960
101,520
$180,415
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