Question

Flexible Budget In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 400,000 units of the standard model and 140,000 units of the deluxe model during the coming year. The standard model requires 0.10 direct labor hour per unit, and the deluxe model requires 0.16. The controller has developed the following cost formulas for each of the four overhead items: Cost Formula Maintenance $34,600 + $1.25 DLH Power $0.50 DLH Indirect labor $68,200 + $2.30 DLH Rent $31,700 Required: 1. Prepare an overhead budget for the expected activity level for the coming year.

Answer 1

standard deluxe Total expected sales units direct labor hour per unit Expected labor hours 400000 140000 0.1 0.16 4000022400 variable overhead cost maintanance cost $1.25 per DLH power $0.5 per DLH indirect labor $2.3 per DLH total variable overhead cost budget 28000 7 500002 20000 11200 78000 31200 51520 143520 252720 fixed overhead cost maintanance cost indirect direct labor rent total fixed overhead cost budget 34600 68200 31700 134500 total overhead budget 387220