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Q-1.

The Smart Homes manufacture is selling home appliances. The Head of Gujranwala Plant want to introduce budgetary control system for 2020.The following data were used in developing the master manufacturing overhead budget for the Assembly Department, this department use the direct labor hours as activity index.

Annual Fix Costs (Rs.)		Variable Costs	Rate per Direct Labor Hour
Rent	24,000	Indirect Material	Rs. 0.40
Depreciation	12,000	Indirect Labor	Rs. 0.50
Insurance	18,000	Factory Utilities	Rs. 0.30
Quality assurance	42,000	Factory Repairs	Rs.0.20

The master overhead budget was prepared on the expectation that 480,000 direct labor hours will be worked during the year. In June, 42,000 direct labor hours were worked. Fixed: same as budgeted.

At that level of activity, actual costs were as shown below:

Variableper direct labor hour: Indirect labor Rs.0.43, Indirect materials Rs.0.49, Factory utilities Rs.0.32, and Factory repairs Rs.0.24.

Requirements:

1. Prepare a monthly manufacturing overhead flexible budget for the year ending December 31, 2020, assuming production levels range from 35,000 to 45,000 Direct Labor Hours. (Prepare only for 35,000 units and 45,000 units).
2. Prepare a budget report for June comparing actual results with budget data based on the flexible budget.
3. As per your results, what do u think cost were controlled properly or not? Defend your answer.

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