Flexible Budget for Various Production Levels Nadia Tamimi, controller for First-Aid-Care Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of bandages for hospitals: (1) Young-Ones, designed for children, and (2) Surga-Aid, designed for use on larger injuries. The two lines of bandages use common raw materials in different proportions. The company expects to produce 80,000 cartons of each product during the coming year. Young-Ones requires 0.20 direct labour hours per carton, and Surga-Aid requires 0.30 direct labour hours per carton. Nadia has developed the following fixed and variable costs for each of the four overhead items: Overhead Item Fixed Cost Variable Rate per Direct Labour Hour Maintenance $57,250 $0.50 Power 0.40 Indirect labour 43,500 2.10 Rent 39,000 Required: 1. Calculate the direct labour hours required for production that is 10 percent higher than expected. 44,000 direct labour hours Calculate the direct labour hours required for production that is 20 percent lower than expected. 32000 direct labour hours 2. Prepare an overhead budget that reflects production that is 10 percent higher than expected. (Hint: Use total direct labour hours calculated in Requirement 1.) First-Aid-Care Company Overhead Budget For the Coming Year Formula Activity Level at 10% higher Variable costs: Maintenance $0.50 Power 0.40 Indirect labour 2.10 Total variable costs Fixed costs: Maintenance Indirect labour Rent Total fixed costs Total overhead costs Prepare an overhead budget that reflects production that is 20 percent lower than expected. (Hint: Use total direct labour hours First-Aid-Care Company Overhead Budget For the Coming Year Formula Activity Level 32,000 Hours Variable costs: Maintenance $0.50 Power 0.40 Indirect labour 2.10 Total variable costs $ Fixed costs: Maintenance Indirect labour Rent Total fixed costs Total overhead costs