1. 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 2020. 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 $ 0.42 Supervision $ 42600 Indirect material $ 0.50 depreciation $ 17280 Factory utilities $ 0.33 insurance $ 14640 Factory repairs $ 0.23 rent $ 30600 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 $0.28. Fixed: same as budgeted. Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2020, assuming production levels range from 35,100 to 49,800 direct labor hours. Use increments of 4,900 direct labor hours. Prepare a budget report for June comparing actual results with budget data based on the flexible budget. State the formula for computing the total budgeted costs for the Ironing Department. (Consist of Fixed Costs and Variable Costs)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

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1. 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 2020. 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

$ 0.42

Supervision

$ 42600

Indirect material

$ 0.50

depreciation

$ 17280

Factory utilities

$ 0.33

insurance

$ 14640

Factory repairs

$ 0.23

rent

$ 30600

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 $0.28.

Fixed: same as budgeted.

Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2020, assuming production levels range from 35,100 to 49,800 direct labor hours. Use increments of 4,900 direct labor hours.
Prepare a budget report for June comparing actual results with budget data based on the flexible budget.
State the formula for computing the total budgeted costs for the Ironing Department. (Consist of Fixed Costs and Variable Costs)

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