Allsorts Insurance Company uses a flexible overhead budget for its new policy department. The firm offers five types of policy, with the following standard hours allowed per policy for clerical processing: Health 1.5 hour Life 2.0 hours 2.5 hours 2.5 hours 5.5 hours Automobile Renter Homeowner The following numbers of insurance applications were processed during July: Health 400 Life 325 Automobile 175 Renter Homeowner 625 325 The accountant estimates that the variable overhead rate in the application processing department is $15 per hour, and that fixed overhead costs will amount to $6,500 per month. Required: 1. Calculate the number of standard clerical hours allowed in July, given the number of applications processed. 2. Explain why the company's flexible budget should be based on the number of clerical hours allowed rather than on the number of applications processed. 3. Construct a formula flexible overhead budget for the company. 4. Calculate the flexible budget for total overhead cost in July.