Finesse Company manufactures tablecloths. Sales have grown rapidly over the past two years. As a result, the president has installed a budgetary control system for 2012. The following data were used in developing the master manufacturing overhead budget for the ironing department. The budget is based on an activity index of direct labour hours.

The company prepared the master overhead budget on the expectation that 600,000 direct labour hours would be worked during the year. In June, 48,000 direct labour hours were worked. At that level of activity, actual costs were as follows:
1. Variable, per direct labour hour-indirect labour $0.53; indirect materials $0.70; factory utilities $0.47; and factory repairs $0.29.
2. Fixed-same as budgeted.
Instructions
(a) Prepare a monthly flexible manufacturing overhead budget for the year ending December 31, 2012, assuming production levels range from 35,000 to 50,000 direct labour hours per month. Use increments of 5,000 direct labour hours.
(b) Prepare a budget performance report for June, comparing actual results with budgeted data based on the flexible budget.
(c) Were costs effectively controlled? Explain.
(d) State the formula for calculating the total budgeted costs for Finesse Company.
(e) Prepare a flexible budget graph, showing total budgeted costs at 35,000 and 45,000 direct labour hours. Use increments of 5,000 direct labour hours on the horizontal axis and increments of $10,000 on the vertical axis.

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Variable Costs Indirect labour Indirect materials Factory utilities Factory repairs Rate per Direct Labour Hour $0.50 0.75 0.45 0.25 Annual Fixed Costs Supervision Depreciation Insurance Remt $45,000 20,000 15,000 30,000