FLEXIBLE BUDGETING Quarterly budgeted overhead costs for two different levels of activity follow. The 2,000 level was the expected level from the master budget.

Cost Formula ($) Direct Labor Hours Fixed Variable 1,000 Hours 2,000 Hours Maintenance 4,000 6.00 $10,000 $16,000 Depreciation 5,000 — 5,000 5,000 Supervision 15,000 — 15,000 15,000 Supplies — 1.40 1,400 2,800 Power — 0.75 750 1,500 Other 8,000 0.10 8,100 8,200 The actual activity level was 1,650 hours.

Required:

. Prepare a flexible budget for an activity level of 1,650 direct labor hours.

. Suppose that all of the formulas for each item are missing. You only have the budgeted costs for each level of activity. Show how you can obtain the formulas for each item by using the information given for the budgeted costs for the two levels.

Problem