Flexible Budget for Various Levels of Activity

Palladium Inc. produces a variety of household cleaning products. Palladiums controller has developed standard costs for the following four overhead items:

Overhead Item	Total Fixed Cost	Variable Rate per Direct Labor Hour
Maintenance	$ 86,000	$0.20
Power		0.45
Indirect labor	140,000	2.10
Rent	35,000

Next year, Palladium expects production to require 90,000 direct labor hours.

Required:

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

Palladium Inc.
Overhead Budget
For the Coming Year
Variable costs:	Rate per Hour	Activity Level 90,000 Hours
Maintenance	$fill in the blank 0ef6bf055076030_1	$fill in the blank 0ef6bf055076030_2
Power	fill in the blank 0ef6bf055076030_3	fill in the blank 0ef6bf055076030_4
Indirect labor	fill in the blank 0ef6bf055076030_5	fill in the blank 0ef6bf055076030_6
Total variable cost		$fill in the blank 0ef6bf055076030_7
Fixed costs:
Maintenance		$fill in the blank 0ef6bf055076030_8
Indirect labor		fill in the blank 0ef6bf055076030_9
Rent		fill in the blank 0ef6bf055076030_10
Total fixed costs		$fill in the blank 0ef6bf055076030_11
Total overhead costs		$fill in the blank 0ef6bf055076030_12

Feedback

Enter the Variable Rate per Direct Labor Hour in the first column from the information provided.

Multiply the rate by the number of budgeted hours and enter the amounts in the second column. Fixed costs are given and do not change with the level of production. Total the column to determine total overhead costs.

Review the "How to Prepare a Before-the-Fact Flexible Budget" example in the text.

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

Activity Level
	Rate per Hour	fill in the blank 4e970707000bfc3_1 Hours	fill in the blank 4e970707000bfc3_2 Hours
Variable costs:
Maintenance	$fill in the blank 4e970707000bfc3_3	$ fill in the blank 4e970707000bfc3_4	$ fill in the blank 4e970707000bfc3_5
Power	fill in the blank 4e970707000bfc3_6	fill in the blank 4e970707000bfc3_7	fill in the blank 4e970707000bfc3_8
Indirect labor	fill in the blank 4e970707000bfc3_9	fill in the blank 4e970707000bfc3_10	fill in the blank 4e970707000bfc3_11
Total variable costs		$fill in the blank 4e970707000bfc3_12	$fill in the blank 4e970707000bfc3_13
Fixed costs:
Maintenance		$ fill in the blank 4e970707000bfc3_14	$ fill in the blank 4e970707000bfc3_15
Indirect labor		fill in the blank 4e970707000bfc3_16	fill in the blank 4e970707000bfc3_17
Rent		fill in the blank 4e970707000bfc3_18	fill in the blank 4e970707000bfc3_19
Total fixed costs		$fill in the blank 4e970707000bfc3_20	$fill in the blank 4e970707000bfc3_21
Total overhead costs		$fill in the blank 4e970707000bfc3_22	$fill in the blank 4e970707000bfc3_23