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 0.10 direct labor hour per unit, and the household cleaner requires 0.16. The controller has developed the following cost formulas for each of the four overhead items:

	Cost Formula
Maintenance	$34,300 + $1.25 DLH
Power	$0.50 DLH
Indirect labor	$68,500 + $2.30 DLH
Rent	$31,100

Required:

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1. Prepare an overhead budget for the expected activity level for the coming year.

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

	Per DLH
Budgeted direct labor hours		fill in the blank fa39090d5faffe0_1
Variable costs:
Maintenance	$fill in the blank fa39090d5faffe0_2	$fill in the blank fa39090d5faffe0_3
Power	fill in the blank fa39090d5faffe0_4	fill in the blank fa39090d5faffe0_5
Indirect labor	fill in the blank fa39090d5faffe0_6	fill in the blank fa39090d5faffe0_7
Total variable costs			$fill in the blank fa39090d5faffe0_8
Fixed costs:
Maintenance		$fill in the blank fa39090d5faffe0_9
Indirect labor		fill in the blank fa39090d5faffe0_10
Rent		fill in the blank fa39090d5faffe0_11
Total fixed costs			fill in the blank fa39090d5faffe0_12
Total overhead costs			$fill in the blank fa39090d5faffe0_13

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2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products).

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

	Per DLH
Budgeted direct labor hours		fill in the blank f4e21bf99fe0078_1
Variable costs:
Maintenance	$fill in the blank f4e21bf99fe0078_2	$fill in the blank f4e21bf99fe0078_3
Power	fill in the blank f4e21bf99fe0078_4	fill in the blank f4e21bf99fe0078_5
Indirect labor	fill in the blank f4e21bf99fe0078_6	fill in the blank f4e21bf99fe0078_7
Total variable costs			$fill in the blank f4e21bf99fe0078_8
Fixed costs:
Maintenance		$fill in the blank f4e21bf99fe0078_9
Indirect labor		fill in the blank f4e21bf99fe0078_10
Rent		fill in the blank f4e21bf99fe0078_11
Total fixed costs			fill in the blank f4e21bf99fe0078_12
Total overhead costs			$fill in the blank f4e21bf99fe0078_13

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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
Budgeted direct labor hours		fill in the blank b9c93b07ffdbf84_1
Variable costs:
Maintenance	$fill in the blank b9c93b07ffdbf84_2	$fill in the blank b9c93b07ffdbf84_3
Power	fill in the blank b9c93b07ffdbf84_4	fill in the blank b9c93b07ffdbf84_5
Indirect labor	fill in the blank b9c93b07ffdbf84_6	fill in the blank b9c93b07ffdbf84_7
Total variable costs			$fill in the blank b9c93b07ffdbf84_8
Fixed costs:
Maintenance		$fill in the blank b9c93b07ffdbf84_9
Indirect labor		fill in the blank b9c93b07ffdbf84_10
Rent		fill in the blank b9c93b07ffdbf84_11
Total fixed costs			fill in the blank b9c93b07ffdbf84_12
Total overhead costs			$fill in the blank b9c93b07ffdbf84_13

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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.