Question

Problem 24-2A (Part Level Submission) 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. Rate per Direct Labor Hour Variable costs Indirect labor Indirect materials Factory utilities Factory repairs Annual Fixed Costs $41,040 16,200 13,320 30,960 $0.44 Supervision 0.55 Depreciation 0.32 Insurance 0.24 Rent The master overhead budget was prepared on the expectation that 479,500 direct labor hours will be worked during the year. In June, 37,500 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 $0.54, factory utilities $0.35, and factory repairs $0.29 Fixed: same as budgeted (a) & (b) (a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 38,300 to 50,900 direct labor hours. Use increments of 4,200 direct labor hours. (List variable costs before fixed costs.) ZELMER COMPANY Monthly Manufacturing Overhead Flexible Budget Ironing Department For the Year 2017

Answer 1

	Zelmer Company
	Monthly manufacturing overhead Flexible Budget
	Ironing Department
	For the year 2017
	Activity level
	Direct labor hours		38,300	42,500	46,700	50,900
	Variable Costs:
	Indirect labor	$      0.44	$      16,852	$       18,700	$       20,548	$       22,396
	Indirect material	$      0.55	$      21,065	$       23,375	$       25,685	$       27,995
	Factory Utilities	$      0.32	$      12,256	$       13,600	$       14,944	$       16,288
	Factory Repair	$      0.24	$        9,192	$       10,200	$       11,208	$       12,216
(a)	Total Variable costs	$      1.55	$      59,365	$       65,875	$       72,385	$       78,895
	Fixed costs:
	Supervision	$41040/12	$        3,420	$         3,420	$         3,420	$         3,420
	Depreciation	$16200/12	$        1,350	$         1,350	$         1,350	$         1,350
	Insurance	$13320/12	$        1,110	$         1,110	$         1,110	$         1,110
	Rent	$30960/12	$        2,580	$         2,580	$         2,580	$         2,580
(b)	Total Fixed costs		$        8,460	$         8,460	$         8,460	$         8,460
(a) + (b)	Total costs		$      67,825	$       74,335	$       80,845	$       87,355
	Zelmer Company
	Manufacturing overhead Flexible Budget report
	Ironing Department
	For the month ended June 30, 2017
		Budget	Actual Cost	Budget	Actual Cost	Difference
	Direct labor hours			37,500	37,500
	Variable Costs:
	Indirect labor	$      0.44	$          0.47	$       16,500	$       17,625	$         1,125	U
	Indirect material	$      0.55	$          0.54	$       20,625	$       20,250	$             375	F
	Factory Utilities	$      0.32	$          0.35	$       12,000	$       13,125	$         1,125	U
	Factory Repair	$      0.24	$          0.29	$         9,000	$       10,875	$         1,875	U
(a)	Total Variable costs	$      1.55	$          1.65	$       58,125	$       61,875	$         3,750	U
	Fixed costs:
	Supervision	$41040/12		$         3,420	$         3,420	$                -	N
	Depreciation	$16200/12		$         1,350	$         1,350	$                -	N
	Insurance	$13320/12		$         1,110	$         1,110	$                -	N
	Rent	$30960/12		$         2,580	$         2,580	$                -	N
(b)	Total Fixed costs			$         8,460	$         8,460	$                -	N
(a) + (b)	Total costs			$       66,585	$       70,335	$         3,750	U