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Zelmer Company 48000

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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 2014.
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 pr 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 master overhead budget was prepared on the expectation that 480,000 direct labor
hours will be worked during the year. In June, 41,000 direct labor hours were worked. At
that level of activity, actual costs were as shown below.

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.

(a) Prepare a monthly manufacturing overhead flexible budget for the year ending
December 31, 2014, 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

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