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

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

Prepare a budget performance report for June, comparing actual results with budgeted data based on the flexible budget.

Budget $102,767; Actual $104,687

Were costs effectively controlled? Explain.

State the formula for calculating the total budgeted costs for Finesse Company.

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

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

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

ekkarill92 answered 1 year ago

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