Variable costs Rate per Direct Labor Hour Annual Fixed Costs

Variable costs

Rate per Direct
Labor Hour

Annual Fixed Costs

(a) & (b)

ZELMER COMPANY
Monthly Manufacturing Overhead Flexible Budget
Ironing Department
For the Year 2017

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 Indirect labor $0.40 Supervision $47,040 Indirect materials 0.54 Depreciation 20,280 Factory utilities 0.30 Insurance 12,480 Factory repairs 0.23 Rent 30,000 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 $0.28. Fixed: same as budgeted.

Solution

Solution a:

Solution b: