Zelmer Company manufactures tablecloths. Sales have grown rapidly over the past

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. Rate per Direct Labor Hour Variable costs Indirect labor Indirect materials Factory utilities Factory repairs Annual Fixed Costs $42,600 17,280 14,640 30,600 $0.42 Supervision 0.50 Depreciation 0.33 Insurance 0.23 Rent 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 so.28. Fixed: same as budgeted. (a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 35,100 to 49,800 direct labor hours. Use increments of 4,900 direct labor hours. (List variable costs before fixed costs.) ZELMER COMPANY Monthly Manufacturing Overhead Flexible Budget Ironing Department For the Year 2017

Explanation / Answer

Master Plan in DLH 481600 Usage in June in DLH 38400 Standard Rate: Indirect Labor 0.42 Indirect Material 0.50 Utilities 0.33 Repair 0.23 1.48 Actual Rate: Indirect Labor 0.46 Indirect Material 0.48 Utilities 0.37 Repair 0.28 1.59 Zelmar Company Manufacturing Overhead Flexible Budget Report Ironing Department For the Year 2017 Direct Labor Hours: 35100 40000 44800 49600 Variable OH: Indirect Labor 14742 16800 18816 20832 Indirect Material 17550 20000 22400 24800 Utilities 11583 13200 14784 16368 Repair 8073 9200 10304 11408 Total 51948 59200 66304 73408 Fixed OH: Supervision 3550 3550 3550 3550 Depreciation 1440 1440 1440 1440 Insurance 1220 1220 1220 1220 Rent 2550 2550 2550 2550 Total 8760 8760 8760 8760 Total 60708 67960 75064 82168 Zelmar Company Manufacturing Overhead Flexible Budget Report (38400) For the month ended June 30, 2017 Difference F/UF/Nil Budget Actual Costs Variance F or A Direct Labor Hours: 38400 38400 Variable OH: Indirect Labor 16128 17664 -1536 Adverse Indirect Material 19200 18432 768 Favorable Utilities 12672 14208 -1536 Adverse Repair 8832 10752 -1920 Adverse Total 56832 61056 -4224 Adverse Fixed OH: Supervision 3550 3550 0 - Depreciation 1440 1440 0 - Insurance 1220 1220 0 - Rent 2550 2550 0 Total 8760 8760 0 - Total Level 65592 69816 -4224 Adverse Formula for Monthly Computation is 8760+ 1.48 Per DLH

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