Variable costs Rate per Direct Labor Hour Annual Fixed Costs (a) & (b) (a) Prepa
ID: 2558908 • Letter: V
Question
Variable costs
Rate per Direct
Labor Hour
Annual Fixed Costs
(a) & (b)
(a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 39,800 to 52,700 direct labor hours. Use increments of 4,300 direct labor hours. (List variable costs before fixed costs.)
(b) Prepare a budget report for June comparing actual results with budget data based on the flexible budget. (List variable costs before fixed costs.)
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 $44,400 Indirect materials 0.51 Depreciation 14,640 Factory utilities 0.32 Insurance 16,800 Factory repairs 0.24 Rent 29,280The master overhead budget was prepared on the expectation that 477,100 direct labor hours will be worked during the year. In June, 44,500 direct labor hours were worked. At that level of activity, actual costs were as shown below.
Variable—per direct labor hour: indirect labor $0.46, indirect materials $0.50, factory utilities $0.35, and factory repairs $0.28.
Fixed: same as budgeted.
Explanation / Answer
Answer
Direct Labor Hours
39800
44100
48400
52700
Variable Cost:
Indirect Labor
17114
18963
20812
22661
Indirect materials
20298
22491
24684
26877
Factory Utilities
12736
14112
15488
16864
Factory Repairs
9552
10584
11616
12648
Total Variable Cost
59700
66150
72600
79050
Fixed Cost:
Supervision
44400
44400
44400
44400
Depreciation
14640
14640
14640
14640
Insurance
16800
16800
16800
16800
Rent
29280
29280
29280
29280
Total Fixed Cost
105120
105120
105120
105120
Total Cost
$164820
$171270
$177720
$184170
Budget
Actual Costs
Difference
Favourable/Unfavourable/Neither
Direct Labor Hours
44500
44500
Variable Cost:
Indirect Labor
19135
20470
1335
Unfavorable
Indirect materials
22695
22250
445
Favorable
Factory Utilities
14240
15575
1335
Unfavorable
Factory Repairs
10680
12460
1780
Unfavorable
Total Variable Cost
66750
70755
4005
Unfavorable
Fixed Cost:
Supervision
44400
44400
0
Neither favorable nor UnFavorable
Depreciation
14640
14640
0
Neither favorable nor UnFavorable
Insurance
16800
16800
0
Neither favorable nor UnFavorable
Rent
29280
29280
0
Neither favorable nor UnFavorable
Total Fixed Cost
105120
105120
0
Neither favorable nor UnFavorable
Total Cost
171870
175875
4005
Unfavorable
Direct Labor Hours
39800
44100
48400
52700
Variable Cost:
Indirect Labor
17114
18963
20812
22661
Indirect materials
20298
22491
24684
26877
Factory Utilities
12736
14112
15488
16864
Factory Repairs
9552
10584
11616
12648
Total Variable Cost
59700
66150
72600
79050
Fixed Cost:
Supervision
44400
44400
44400
44400
Depreciation
14640
14640
14640
14640
Insurance
16800
16800
16800
16800
Rent
29280
29280
29280
29280
Total Fixed Cost
105120
105120
105120
105120
Total Cost
$164820
$171270
$177720
$184170
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