In: Accounting
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 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.
Rate per Direct Variable Costs Labor Hour Annual Fixed Costs
Indirect labor $0.40 Supervision $48,000 Indirect materials 0.50
Depreciation 18,000 Factory utilities 0.30 Insurance 12,000 Factory
repairs 0.20 Rent 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 $0.44, indirect materials $0.48, factory utilities
$0.32, and factory repairs $0.25. Fixed: same as budgeted.
Instructions (a) Prepare a monthly manufacturing overhead fl exible
budget for the year ending December 31, 2017, assuming production
levels range from 35,000 to 50,000 direct labor hours. Use
increments of 5,000 direct labor hours. (b) Prepare a budget report
for June comparing actual results with budget data based on the fl
exible budget. (c) Were costs effectively controlled? Explain. (d)
State the formula for computing the total budgeted costs for the
Ironing Department. (e) Prepare the fl exible budget graph, showing
total budgeted costs at 35,000 and 45,000 direct labor hours. Use
increments of 5,000 direct labor hours on the horizontal axis and
increments of $10,000 on the vertical axi
Refer to the below images for the asked requirements above , in a detailed way of solution with calculations.