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m + Zelmer Company Ironing Department Manufacturing Overhead Flexible Budget Report For the Month Ended June 30, 2017 Budget Actual Costs Difference Favorable-F Unfavorable - U Neutral - N C. Costs were not effectively controlled because 3 of the 4 variable costs went over the budget. 50000 D. The formula is fixed costs of 9,000 plus total variable costs of 1.40 per direct labor hour. Zelmer Company Monthly Manufacturing Overhead Flexible Budget Ironing Department For the Year 2017 5 Activity Level 6 Direct Labor Hours 35000 40000 45000 7 Variable Costs 8 Indirect Labor $ 14,000 $ 16,000 $ 18,000 $ 9 Indirect Materials $ 17,500 $ 20,000 $ 22,500 $ 10 Factory Utilities $ 10,500 $ 12,000 $ 13,500 $ 11 Factory Repair $ 7,000 $ 8,000 $ 9,000 $ 12 Total Variable costs $ 49,000 $ 56,000 $ 63,000 $ 13 Fixed Cost 14 Supervision $ 4,000 $ 4,000 $ 4,000 $ 15 Depreciation $ 1,500 $ 1,500 $ 1,500 $ 16 Insurance $ 1,000 $ 1,000 $ 1,000 $ Rent $ 2,500 $ 2,500 $ 2,500 $ 18 Total Fixed Cost $ 9,000 $ 9,000 $ 9,000 $ 19 Total Costs $ 58,000 $ 65,000 $ 72,000 $ 20,000 25,000 15,000 10,000 70,000 41000 41000 $ $ $ $ $ 16,400 20,500 12,300 8,200 57,400 $ $ $ $ $ 18,040 19,680 13,120 10,250 61,090 4,000 1,500 1,000 2,500 9,000 79,000 Direct Labor Hours Variable Costs Indirect Labor Indirect Materials Factory Utilities Factory Repair Total Variable costs Fixed Cost Supervision Depreciation Insurance Rent Total Fixed Costs Total Costs z zz zz CCCT $ $ $ $ $ $ 4,000$ 1,500 $ 1,000 $ 2,500 $ 9,000 $ 66,400 $ 4,000 1,500 1,000 2,500 9,000 70,090 P14.2 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 $0.40 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. 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. (a) Total costs: 35,000 DLH, $58,000; 50,000 DLH, $79,000 (b) Budget $66,400 Actual $70,090