Question

Problem 24-2A

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. Variable costs Rate per Direct Labor Hour Annual Fixed Costs Indirect labor $0.43 Supervision $45,120 Indirect materials 0.52 Depreciation 18,000 Factory utilities 0.33 Insurance 17,640 Factory repairs 0.21 Rent 27,720 The master overhead budget was prepared on the expectation that 480,800 direct labor hours will be worked during the year. In June, 46,500 direct labor hours were worked. At that level of activity, actual costs were as shown below. Variable—per direct labor hour: indirect labor $0.47, indirect materials $0.50, factory utilities $0.37, and factory repairs $0.25. Fixed: same as budgeted.

(a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 38,700 to 53,400 direct labor hours. Use increments of 4,900 direct labor hours. (List variable costs before fixed costs.)

b.) State the formula for computing the total budgeted costs for the Ironing Department. (Round variable cost per unit to 2 decimal places, e.g. 1.55.) The formula is = $____ + total variable costs of $____ per direct labor hour.

Answer 1

Given Data
Variable Cost	Cost P/H	Fixed Cost	Fixed
Indirect Labour	0.43	Supervision	$ 45,120.00
Indirect Material	0.52	Depreciation	$ 18,000.00
Factory Utilities	0.33	Insurance	$ 17,640.00
Factory Repairs	0.21	Factory Rent	$ 27,720.00

Monthly manufacturing overhead flexible budget for the year ending Dec 31,17
	Activity Level(Hours)
Description	38700	43600	48500	53400
Variable Cost
Indirect Labor@$.43 per hour	$    16,641.00	$    18,748.00	$    20,855.00	$    22,962.00
Indirect Material@$.52 per hour	$    20,124.00	$    22,672.00	$    25,220.00	$    27,768.00
Factory Utilities@$.33 per hour	$    12,771.00	$    14,388.00	$    16,005.00	$    17,622.00
Factory Repairs@$.21 per hour	$      8,127.00	$      9,156.00	$    10,185.00	$    11,214.00
Total Variable Cost(A)	$    57,663.00	$    64,964.00	$    72,265.00	$    79,566.00
Fixed Cost
Supervision	$    45,120.00	$    45,120.00	$    45,120.00	$    45,120.00
Depreciation	$    18,000.00	$    18,000.00	$    18,000.00	$    18,000.00
Insurance	$    17,640.00	$    17,640.00	$    17,640.00	$    17,640.00
Factory Rent	$    27,720.00	$    27,720.00	$    27,720.00	$    27,720.00
Total Fixed Cost(B)	$ 108,480.00	$ 108,480.00	$ 108,480.00	$ 108,480.00
Total Cost(A+B)	$ 166,143.00	$ 173,444.00	$ 180,745.00	$ 188,046.00

Total budgeted cost= (Fixed Cost + Total Variable cost per direct labor hour)

for June=$108,480 + $1.59 per labor hour.

  for December =$108,480 + $1.49 per labor hour.