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Flexible Budget In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two
Flexible Budget In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 300,000 units of the standard model and 130,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items: Cost Formula Maintenance $34,600 + $1.25 DLH Power $0.50 DLH Indirect labor $68,200 + $2.30 DLH Rent $31,700 Required: Prepare an overhead budget for production that is 20 percent lower than expected. Meliore, Inc. Overhead Budget For the Year Ended December 31 Per DLH Budgeted direct labor hours 25,400 X DLH Variable costs: Maintenance 1.25 31,750 X Power .5 12,700 X Indirect labor 2.3 58,420 X Total variable costs 102,870 Fixed costs: Maintenance 34,600 Indirect labor 68,200 Rent 31,700 Total fixed costs 134,500 Total overhead costs 237,370 X
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