Gibralter Insurance Company uses a flexible overhead budget for its application processing department. The firm offers five types of policies, with the following standard hours allowed for clerical processing. Automobile Renter's Homeowner's Health Life 1 hour 1 hour 2 hours 2 hours 5 hours The following numbers of insurance applications were processed during July. Automobile Renter's Homeowner's Health Life 250 200 100 400 200 The controller estimates that the variable-overhead rate in the application processing department is $4.00 per clerical hour, and that fixed-overhead costs will amount to $2,000 per month. Required: 1. How many standard clerical hours are allowed in July, given actual application activity? 2. Why would it not be sensible to base the company's flexible budget on the number of applications processed instead of the number of clerical hours allowed? 3. Construct a formula flexible overhead budget for the company. 4. What is the flexible budget for total overhead cost in July? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Why would it not be sensible to base the company's flexible budget on the number of applications processed instead of the number of clerical hours allowed? Basing the flexible budget on the number of applications would give a misleading estimate of overhead costs because different types of applications require different amounts of clerical time. O A flexible budget based on applications processed would ignore fixed costs. A flexible budget based on applications processed would be misleading because variable overhead costs are not related to the number of applications processed. Basing a flexible budget on the number of applications processed is not sensible because the same number of applications may not be processed each day.