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:

Monthly manufacturing overhead flexible budget for the year ended 2017

Activity Level

Direct Labor Hours

$35,000

$40,000

$45,000

$50,000

Variable Costs

Indirect Materials

$17,500

$20,000

$22,500

$25,000

Indirect Labor

$14,000

$16,000

$18,000

$20,000

Factory Repairs

$7,000

$8,000

$9,000

$10,000

Factory Utilities

$10,500

$12,000

$13,500

$15,000

Total Variable Costs

$49,000

$56,000

$63,000

$70,000

Fixed Costs

Insurance

$1,000

$1,000

$1,000

$1,000

Rent

$2,500

$2,500

$2,500

$2,500

Supervision

$4,000

$4,000

$4,000

$4,000

Depreciation

$1,500

$1,500

$1,500

$1,500

Total Fixed Costs

$9,000

$9,000

$9,000

$9,000

Total cost

$58,000

$65,000

$72,000

$79,000

Manufacturing overhead flexible budget report for the month ended June 2017

Direct Labor Hours

$41,000

$41,000

Variable Costs

Indirect Materials

$20,500

$19,680

$820

F

Indirect Labor

$16,400

$18,040

$1,640

U

Factory Repairs

$8,200

$10,250

$2,050

U

Factory Utilities

$12,300

$13,120

$820

U

Total Variable Costs

$57,400

$61,090

$3,690

U

Fixed Costs

Insurance

$1,000

$1,000

$0

N

Rent

$2,500

$2,500

$0

N

Supervision

$4,000

$4,000

$0

N

Depreciation

$1,500

$1,500

$0

N

Total Fixed Costs

$9,000

$9,000

$0

N

Total Costs

$66,400

$70,090

$3,690

Formula: $9000 + Total variable costs @ $1.40 per direct labor hour

Activity Level
Direct Labor Hours	$35,000	$40,000	$45,000	$50,000
Variable Costs
Indirect Materials	$17,500	$20,000	$22,500	$25,000
Indirect Labor	$14,000	$16,000	$18,000	$20,000
Factory Repairs	$7,000	$8,000	$9,000	$10,000
Factory Utilities	$10,500	$12,000	$13,500	$15,000
Total Variable Costs	$49,000	$56,000	$63,000	$70,000
Fixed Costs
Insurance	$1,000	$1,000	$1,000	$1,000
Rent	$2,500	$2,500	$2,500	$2,500
Supervision	$4,000	$4,000	$4,000	$4,000
Depreciation	$1,500	$1,500	$1,500	$1,500
Total Fixed Costs	$9,000	$9,000	$9,000	$9,000
Total cost	$58,000	$65,000	$72,000	$79,000