Flexible Budget

In an attempt to improve budgeting, the controller for Engersol, Inc., has developed a flexible budget for overhead costs. Engersol, Inc., makes two types of products, commercial floor cleaners and household floor cleaners. The company expects to produce 300,000 units of the commercial cleaner and 120,000 units of the household cleaner during the coming year. The commercial cleaner requires 0.04 direct labor hour per unit, and the household cleaner requires 0.06. The controller has developed the following cost formulas for each of the four overhead items:

	Cost Formula
Maintenance	$30,000 + $1.25 DLH
Power	$0.50 DLH
Indirect labor	$65,000 + $2.30 DLH
Rent	$28,000

Required:

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1. Prepare an overhead budget for the expected activity level for the coming year. Round your answers to the nearest cent, if required.

Engersol, Inc. Overhead Budget For the Year Ended December 31

	Per DLH		blank
Budgeted direct labor hours	blank	fill in the blank 742527035fc0fd7_1	blank
Variable costs:
Maintenance	$fill in the blank 742527035fc0fd7_2	$fill in the blank 742527035fc0fd7_3
Power	fill in the blank 742527035fc0fd7_4	fill in the blank 742527035fc0fd7_5
Indirect labor	fill in the blank 742527035fc0fd7_6	fill in the blank 742527035fc0fd7_7
Total variable costs			$fill in the blank 742527035fc0fd7_8
Fixed costs:
Maintenance		$fill in the blank 742527035fc0fd7_9
Indirect labor		fill in the blank 742527035fc0fd7_10
Rent		fill in the blank 742527035fc0fd7_11
Total fixed costs			fill in the blank 742527035fc0fd7_12
Total overhead costs			$fill in the blank 742527035fc0fd7_13

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2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products). Round your answers to the nearest cent, if required.

Engersol, Inc. Overhead Budget For the Year Ended December 31

	Per DLH	blank	blank
Budgeted direct labor hours	blank	fill in the blank 319b8100efb0f83_1	blank
Variable costs:
Maintenance	$fill in the blank 319b8100efb0f83_2	$fill in the blank 319b8100efb0f83_3
Power	fill in the blank 319b8100efb0f83_4	fill in the blank 319b8100efb0f83_5
Indirect labor	fill in the blank 319b8100efb0f83_6	fill in the blank 319b8100efb0f83_7
Total variable costs			$fill in the blank 319b8100efb0f83_8
Fixed costs:
Maintenance		$fill in the blank 319b8100efb0f83_9
Indirect labor		fill in the blank 319b8100efb0f83_10
Rent		fill in the blank 319b8100efb0f83_11
Total fixed costs			fill in the blank 319b8100efb0f83_12
Total overhead costs			$fill in the blank 319b8100efb0f83_13

Question Content Area

Prepare an overhead budget for production that is 20 percent lower than expected.

Engersol, Inc. Overhead Budget For the Year Ended December 31

	Per DLH	blank	blank
Budgeted direct labor hours	blank	fill in the blank 5cb38b01b007017_1	blank
Variable costs:
Maintenance	$fill in the blank 5cb38b01b007017_2	$fill in the blank 5cb38b01b007017_3
Power	fill in the blank 5cb38b01b007017_4	fill in the blank 5cb38b01b007017_5
Indirect labor	fill in the blank 5cb38b01b007017_6	fill in the blank 5cb38b01b007017_7
Total variable costs			$fill in the blank 5cb38b01b007017_8
Fixed costs:
Maintenance		$fill in the blank 5cb38b01b007017_9
Indirect labor		fill in the blank 5cb38b01b007017_10
Rent		fill in the blank 5cb38b01b007017_11
Total fixed costs			fill in the blank 5cb38b01b007017_12
Total overhead costs			$fill in the blank 5cb38b01b007017_13

Question Content Area

3. Which of the four data analytic typesdescriptive, diagnostic, predictive, or prescriptiveis being used in creating the three flexible budgets? (See Exhibits 2.5 and 2.6, pp. 37, 40, for a review of data analytic types.)

The flexible budgets are used

descriptivelydiagnosticlypredictivelyprescriptively

to determine how well the company will do under various sales scenarios.