Concord 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 $0.40 Supervision $43,680 Indirect materials 0.51 Depreciation 17,160 Factory utilities 0.34 Insurance 12,480 Factory repairs 0.24 Rent 23,040 The master overhead budget was prepared on the expectation that 484,200 direct labor hours will be worked during the year. In June, 38,600 direct labor hours were worked. At that level of activity, actual costs were as shown below. Variable—per direct labor hour: indirect labor $0.43, indirect materials $0.50, factory utilities $0.38, and factory repairs $0.29. Fixed: same as budgeted.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Concord Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed a budgetary
|
Variable costs
|
Rate per Direct
Labor Hour |
Annual Fixed Costs
|
||||
| Indirect labor | $0.40 | Supervision | $43,680 | |||
| Indirect materials | 0.51 | 17,160 | ||||
| Factory utilities | 0.34 | Insurance | 12,480 | |||
| Factory repairs | 0.24 | Rent | 23,040 |
The
Variable—per direct labor hour: indirect labor $0.43, indirect materials $0.50, factory utilities $0.38, and factory repairs $0.29.
Fixed: same as budgeted.
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