Ayayai Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed budgetary control system for 2022. The following data were used in developing the master manufacturing overhead budget for th Ironing Department, which is based on an activity index of direct labor hours. Variable costs Indirect labor Indirect materials Factory utilities Factory repairs Rate per Direct Labor Hour $0.40 0.50 0.30 0.20 Annual Fixed Costs Supervision Depreciation Insurance Rent $40,800 14,400 12,000 22,800 The master overhead budget was prepared in the expectation that 475,000 direct labor hours will be worked during the year. In June, 37,000 direct labor hours were worked. At that level of activity, actual costs were as shown below. Variable-per direct labor hour: indirect labor $0.42, indirect materials $0.49, factory utilities $0.32, and factory repairs $0.24. Fixed: same as budgeted.
Ayayai Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed budgetary control system for 2022. The following data were used in developing the master manufacturing overhead budget for th Ironing Department, which is based on an activity index of direct labor hours. Variable costs Indirect labor Indirect materials Factory utilities Factory repairs Rate per Direct Labor Hour $0.40 0.50 0.30 0.20 Annual Fixed Costs Supervision Depreciation Insurance Rent $40,800 14,400 12,000 22,800 The master overhead budget was prepared in the expectation that 475,000 direct labor hours will be worked during the year. In June, 37,000 direct labor hours were worked. At that level of activity, actual costs were as shown below. Variable-per direct labor hour: indirect labor $0.42, indirect materials $0.49, factory utilities $0.32, and factory repairs $0.24. Fixed: same as budgeted.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Ayayai Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed a
budgetary control system for 2022. 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
Indirect labor
Indirect materials
Factory utilities
Factory repairs
Rate per Direct
Labor Hour
$0.40
0.50
0.30
0.20
Annual Fixed Costs
Supervision
Depreciation
Insurance
Rent
$40,800
14,400
12,000
22,800
The master overhead budget was prepared in the expectation that 475,000 direct labor hours will be worked during the year. In
June, 37,000 direct labor hours were worked. At that level of activity, actual costs were as shown below.
Variable-per direct labor hour: indirect labor $0.42, indirect materials $0.49, factory utilities $0.32, and factory repairs $0.24.
Fixed: same as budgeted.
Transcribed Image Text:(a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2022, assuming production
levels range from 35,000 to 47,000 direct labor hours. Use increments of 4,000 direct labor hours. (List variable costs before fixed
costs.)
$
AYAYAI COMPANY
Monthly Manufacturing Overhead Flexible Budget
Ironing Department
For the Year 2022
(b) Prepare a budget report for June comparing actual results with budget data based on the flexible budget. (List variable costs
before fixed costs.)
Budget
$
AYAYAI COMPANY
Ironing Department
Manufacturing Overhead Flexible Budget Report
$
Actual Costs
$
I
Nei
no
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