Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows

12-49 Direct and Step-Down Methods of Allocation

Griffin Company has prepared departmental overhead budgets for normal activity levels before allocations as follows:

Building and grounds $ 20,000
Personnel 1,200
General factory administration* 28,020
Cafeteria operating loss 1,430
Storeroom 2,750
Machining 35,100
Assembly 56,500
Total $145,000

*To be allocated before cafeteria.

Management has decided that the most sensible product costs are achieved by using departmental overhead rates. These rates are developed after allocating appropriate service department costs to production departments.

Cost-allocation bases for allocation are to be selected from the following data:
Square Feet of Direct-Labor Number of Floor Space Total Number of Department Hours Employees Occupied Labor Hours Requisitions
Building and grounds — — — — —
Personnel* — — 2,000 — —
General factory administration — 35 7,000 — —
Cafeteria operating loss — 10 4,000 1,000 —
Storeroom — 5 7,000 1,000 —
Machining 5,000 50 30,000 8,000 3,000
Assembly 15,000 100 50,000 17,000 1,500
20,000 200 100,000 27,000 4,500

*Basis used is number of employees.

1. Allocate service department costs by the step-down method. Develop overhead rates per direct labor hour for machining and assembly.
2. Same as in number 1, using the direct method.
3. What would be the plantwide factory-overhead application rate, assuming that direct-labor hours are used as a cost-allocation base?
4. Using the following information about two jobs, prepare three different total overhead costs for each job, using rates developed in numbers 1, 2, and 3.
Direct-Labor Hours
Machining Assembly
Job K10 19 2
Job K12 3 18

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Zelmer Company uses budgets in controlling costs

ACC 560 Week 6 Assignment

P10-3A Zelmer Company uses budgets in controlling costs. The August 2008 budget report for the company's Assembling Department is as follows.

ZELMER COMPANY
Budget Report
Assembling Department
For the Month Ended August 31, 2008
Difference
Favorable F
Manufacturing Costs Budget Actual Unfavorable U
Variable costs
Direct materials $ 48,000 $ 47,000 $1,000 F
Direct labor 54,000 51,300 2,700 F
Indirect materials 24,000 24,200 200 U
Indirect labor 18,000 17,500 500 F
Utilities 15,000 14,900 100 F
Maintenance 9,000 9,200 200 U
Total variable 168,000 164,100 3,900 F
Fixed costs
Rent 12,000 12,000 -0-
Supervision 17,000 17,000 -0-
Depreciation 7,000 7,000 -0-
Total fixed 36,000 36,000 -0-
Total costs $204,000 $200,100 $3,900 F

The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August, because only 58,000 units were produced.

Instructions
(a) State the total budgeted cost formula.
(b) Prepare a budget report for August using flexible budget data. Why does this report provide a better basis for evaluating performance than the report based on static budget data?
(c) In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August.

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Differentiate between the operating and financial budgets that are contained in a master budget

8-5 Differentiate between the operating and financial budgets that are contained in a master budget. Why are both types needed?


Click here for the solution: Differentiate between the operating and financial budgets that are contained in a master budget

a. What is the difference between budget lapsing and line-item budgets?

P 6–4 Budget Lapsing versus Line-Item Budgets
a. What is the difference between budget lapsing and line-item budgets?
b. What types of organizations would you expect to use budget lapsing?
c. What types of organizations would you expect to use line-item budgets?

Click here for the solution: a. What is the difference between budget lapsing and line-item budgets?