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P11.51B Prepare a flexible budget, budget report, and graph for manufacturing overhead. (LO 2, 3) Finesse...
P11.51B
Prepare a flexible budget, budget report, and graph for manufacturing overhead.
(LO 2, 3) Finesse Company manufactures tablecloths. Sales have grown rapidly over the past two 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. The budget is based on an activity index of direct labour hours.
|
Variable Costs |
Rate per Direct Labour Hour |
Annual Fixed Costs |
|
|---|---|---|---|
|
Indirect labour |
$0.50 |
Supervision |
$45,000 |
|
Indirect materials |
0.75 |
Depreciation |
20,000 |
|
Factory utilities |
0.45 |
Insurance |
15,000 |
|
Factory repairs |
0.25 |
Rent |
30,000 |
The company prepared the master overhead budget on the expectation that 600,000 direct labour hours would be worked during the year. In June, 48,000 direct labour hours were worked. At that level of activity, actual costs were as follows:
- 1.Variable, per direct labour hour—indirect labour $0.53; indirect materials $0.70; factory utilities $0.47; and factory repairs $0.29.
- 2.Fixed—same as budgeted.
Instructions
a.
Prepare a monthly flexible manufacturing overhead budget for the year ending December 31, 2020, assuming production levels range from 35,000 to 50,000 direct labour hours per month. Use increments of 5,000 direct labour hours.
Total costs: 35,000 DLH, $77,417; 50,000 DLH, $106,667
b.
Prepare a budget performance report for June, comparing actual results with budgeted data based on the flexible budget.
Budget $102,767; Actual $104,687
c.
Were costs effectively controlled? Explain.
d.
State the formula for calculating the total budgeted costs for Finesse Company.
e.
Prepare a flexible budget graph, showing total budgeted costs at 35,000 and 45,000 direct labour hours. Use increments of 5,000 direct labour hours on the horizontal axis and increments of $10,000 on the vertical axis.
Solutions
Expert Solution
a.
| Finess
Company Flexible Manufacturing Overhead Budget For June 2020 |
||||
| Activity Level ( direct labor hours ) | 35,000 | 40,000 | 45,000 | 50,000 |
| Variable Costs | ||||
| Indirect Labor | $ 17,500 | $ 20,000 | $ 22,500 | $ 25,000 |
| Indirect Materials | 26,250 | 30,000 | 33,750 | 37,500 |
| Factory Utilities | 15,750 | 18,000 | 20,250 | 22,500 |
| Factory Repairs | 8,750 | 10,000 | 11,250 | 12,500 |
| Total Variable Costs | $ 68,250 | 78,000 | 87,750 | 97,500 |
| Fixed Costs | ||||
| Supervision | 45,000 | 45,000 | 45,000 | 45,000 |
| Depreciation | 20,000 | 20,000 | 20,000 | 20,000 |
| Insurance | 15,000 | 15,000 | 15,000 | 15,000 |
| Rent | 30,000 | 30,000 | 30,000 | 30,000 |
| Total Fixed Costs | $ 110,000 | $ 110,000 | $ 110,000 | $ 110,000 |
| Total Manufacturing Overhead | $ 178,250 | $ 188,000 | $ 197,750 | $ 207,500 |
b.
| Finess
Company Flexible Budget Performance Report : Manufacturing Overhead For June 2020 |
|||
| Budget | Actuals | Variance | |
| Activity Level ( direct labor hours ) | 48,000 | 48,000 | |
| Variable Manufacturing Overhead | |||
| Indirect Labor | $ 24,000 | $ 25,440 | $ 1,440 U |
| Indirect Materials | 36,000 | 33,600 | 2,400 F |
| Factory Utilities | 21,600 | 22,560 | 960 U |
| Factory Repairs | 12,000 | 13,920 | 1,920 U |
| Total Variable Manufacturing Overhead | $ 93,600 | $ 95,520 | $ 1,920 U |
| Fixed Manufacturing Overhead | |||
| Supervision | $ 45,000 | $ 45,000 | None |
| Depreciation | 20,000 | 20,000 | None |
| Insurance | 15,000 | 15,000 | None |
| Rent | 30,000 | 30,000 | None |
| Total Fixed Manufacturing Overhead | $ 110,000 | $ 110,000 | None |
| Total Manufacturing Overhead | $ 203,600 | $ 205,520 | $ 19,20 U |
c. No.
d. Total cost = 1.95 q + $ 110,000
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Depreciation of plant and equipment
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Flexible Overhead Budget
Leno Manufacturing Company prepared the following factory
overhead cost budget for the Press Department for October of the
current year, during which it expected to require 14,000 hours of
productive capacity in the department:
Variable overhead cost:
Indirect factory labor
$133,000
Power and light
6,440
Indirect materials
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Total variable overhead
cost
$170,240
Fixed overhead cost:
Supervisory salaries
$59,580
Depreciation of plant and equipment
37,450
Insurance and property taxes
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Total fixed overhead
cost
120,860
Total factory...
Flexible Overhead Budget Leno Manufacturing Company prepared the following factory overhead cost budget for the Press...
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Leno Manufacturing Company prepared the following factory
overhead cost budget for the Press Department for October of the
current year, during which it expected to require 13,000 hours of
productive capacity in the department:
Variable overhead cost:
Indirect factory labor
$122,200
Power and light
4,160
Indirect materials
35,100
Total variable overhead
cost
$161,460
Fixed overhead cost:
Supervisory salaries
$56,510
Depreciation of plant and equipment
35,520
Insurance and property taxes
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Total fixed overhead
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Total factory...
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Flexible Overhead Budget
Leno Manufacturing Company prepared the following factory
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current year, during which it expected to require 15,000 hours of
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Variable overhead costs:
Indirect factory labor
$118,500
Power and light
6,900
Indirect materials
42,000
Total variable overhead
cost
$167,400
Fixed overhead costs:
Supervisory salaries
$58,590
Depreciation of plant and equipment
36,830
Insurance and property taxes
23,440
Total fixed overhead
cost
118,860
Total factory...
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Indirect factory labor
$180,000
Power and light
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Indirect materials
64,000
Total variable overhead
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$256,000
Fixed overhead costs:
Supervisory salaries
$ 80,000
Depreciation of plant and equipment
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Insurance and property taxes
32,000
Total fixed overhead
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$87,000
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Indirect materials
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Total variable overhead
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Fixed overhead cost:
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$42,840
Depreciation of plant and equipment
26,930
Insurance and property taxes
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1)
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Leno Manufacturing Company prepared the following factory
overhead cost budget for the Press Department for October of the
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Variable overhead cost:
Indirect factory labor
$158,400
Power and light
6,120
Indirect materials
46,800
Total variable overhead
cost
$211,320
Fixed overhead cost:
Supervisory salaries
$73,960
Depreciation of plant and equipment
46,490
Insurance and property taxes
29,580
Total fixed overhead
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Total...
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Depreciation of plant and equipment
25,980
Insurance and property taxes
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83,840
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