*Problem 22-2A (Part Level Submission) Zelmer Company manufactures tablecloths.

Question

*Problem 22-2A (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 $0.40 Supervision 0.50 Depreciation 0.30 Insurance 0.20 Rent 48,000 18,000 12,000 30,000 The master overhead budget was prepared on the expectation that 480,000 direct labor hours will be worked during the year. In June, 41,000 direct labor hours were worked. At that level of activity, actual costs were as shown below. variable-per direct labor hour: indirect labor $0.44, indirect materials $0.48, factory utilities $0.32, and factory repairs $0.25 Fixed: same as budgeted.

Explanation / Answer

Manufacturing overhead flexible budget Actual Neither Favourable budget costs nor unfavourable direct labor hours 41,000 41,000 Variable costs indirect labor 16400 18040 1640 U indirect materials 20500 19680 820 F factory utilities 12300 13120 820 U factory repairs 8200 10250 2050 U total variable costs 57400 61090 3690 U fixed costs supervision 4,000 4,000 0 N Depreciation 1,500 1,500 0 N insurance 1,000 1,000 0 N rent 2,500 2,500 0 N total fixed costs 9,000 9,000 0 N total costs 66,400 70,090 3,690 U

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