Four Corners Insurance Company insures clients in Colorado, New Mexico, Arizona, and Utah. The company uses a flexible overhead budget for its application-processing department. The firm offers five types of policies. The following number of standard hours are allowed for clerical processing.

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Required

a. How many standard clerical hours are allowed in July given actual application activity?

b. Why is it not sensible to base the company’s flexible budget on the number of applications processed instead of the number of clerical hours allowed?

c. Construct a formula flexible overhead budget for the company.

What is the flexible budget for total overhead cost in July?