Refer to the information for Healthy Pet Company on the shown below.
Ladan Suriman, controller for Healthy Pet Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of dog food. BasicDiet is a standard mixture for healthy dogs. SpecialDiet is a reduced protein formulation for older dogs with health problems. The two dog foods use common raw materials in different pro-portions. The company expects to produce 100,000 bags of each product during the coming year. BasicDiet requires 0.30 direct labor hours per bag, and SpecialDiet requires 0.40 direct labor hours per bag. Ladan has developed the following fixed and variable costs for each of the four overhead items:

Required:
1. Calculate the direct labor hours required for production that is 10 percent higher than expected. Calculate the direct labor hours required for production that is 20 percent lower than expected.
2. Prepare an overhead budget that reflects production that is 10 percent higher than expected, and for production that is 20 percent lower than expected.

Transcribed Image Text:

Overhead ltem Maintenance Power Indirect labor Rent Fixed Cost $21,000 Variable Rate per Direct Labor Hour $0.50 0.70 1.60 38,500 42,000