Concept explainers
Zelmer Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed a budgetary
Variable Costs | Rate per Direct 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
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 flexible 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 flexible budget.
(c) Were costs effectively controlled? Explain.
(d) State the formula for computing the total budgeted costs for the Ironing Department.
(e) Prepare the flexible 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 axis.
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