Question

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		$42,240
Indirect materials		0.51		Depreciation		15,600
Factory utilities		0.34		Insurance		15,960
Factory repairs		0.20		Rent		23,280

The master overhead budget was prepared on the expectation that 477,800 direct labor hours will be worked during the year. In June, 43,300 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 $0.49, factory utilities $0.38, and factory repairs $0.24.

Fixed: same as budgeted.

(a) Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2017, assuming production levels range from 37,400 to 55,100 direct labor hours. Use increments of 5,900 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.)

Answer 1

Answer a.

Answer b.