FLEXIBLE BUDGET FOR VARIOUS LEVELS OF ACTIVITY CHC, Inc., produces a variety of shampoos, conditioners, and hair care products. CHC’s controller has developed standard costs for the following four overhead items:

Overhead Item Total Fixed Cost Variable Rate per Direct Labor Hour Maintenance $165,000 $0.30 Power 0.40 Indirect labor 126,500 1.80 Rent 28,000 Next year, CHC expects production to require 150,000 direct labor hours.

Required:

. Prepare an overhead budget for the expected level of direct labor hours for the coming year.

. Prepare an overhead budget that reflects production that is 15 percent higher than expected, and for production that is 15 percent lower than expected.

Exercise