P102A Zelmer Company manufactures tablecloths Sales have gro

P10-2A Zelmer Company manufactures tablecloths. Sales have grown rapidly over the Prepare flesible bueden, past 2 years. As a result, the president has installed a budgetary control system for manufacturing overhead. 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. LO 2),E Variable Costs Indirect labor Indirect material:s Factory utilities Factory repairs Rate per Direct Labor Hour $0.40 0.50 0.30 0.20 Annual Fixed Costs Supervision$48 Depreciation Insurance Rent ,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 $o.44, indirect materials $0.48, factory utilities $0.32, and factory repairs $0.25. Fixed: same as budgeted. Instructions g Decem- (a) Total costs: 35,000 DLH, (a) Prepare a monthly manufacturing overhead flexible budget for the year endin ber 31, 2017, assuming production levels range from 35,000 to 50,000 direct labor hours. Use increments of 5,000 direct labor hours. 58,000; 50,000 DLH, $79,000 566,400 (b) Prepare a budget report for June comparing actual results with budget data based on (b) Budget Actual $70,090 the flexible budget.

Solution

Solution a Flexible budget Particulars Per direct labour cost Labour hr Labour hr Labour hr Labour hr 35000 40000 45000 50000 Indirect Labour 0.4 14000 16000 18000 20000 indirect material 0.5 17500 20000 22500 25000 factory utilities 0.3 10500 12000 13500 15000 factory repairs 0.2 7000 8000 9000 10000 Total Variable Cost 49000 56000 63000 70000 Supervision cost (48000/12) 4000 4000 4000 4000 depreciation (18000/12) 1500 1500 1500 1500 insurance (12000/12) 1000 1000 1000 1000 rent(30000/12) 2500 2500 2500 2500 total fixed cost 9000 9000 9000 9000 Total overhead 58000 65000 72000 79000 Solution b Particulars Budget Budgeted Actual Actual per hr 41000 41000 Indirect Labour 0.4 16400 18040 0.44 indirect material 0.5 20500 19680 0.48 factory utilities 0.3 12300 13120 0.32 factory repairs 0.2 8200 10250 0.25 Total Variable Cost 57400 61090 Supervision cost (48000/12) 4000 4000 depreciation (18000/12) 1500 1500 insurance (12000/12) 1000 1000 rent(30000/12) 2500 2500 total fixed cost 9000 9000 Total overhead 66400 70090 Solution c as we have seen in the solution b, cost for indrect material have been effectively cpontrolled but for others cost have not been effectively used. Solution d Budgeted cost= total variable cost per direct lkabour hour* no of direct hour + Fixed cost per annum                              = (0.4+0.5+0.3+0.2)* direct labour hour + 84000                             = 1.4* direct labour hours + 84000