Refer to DCdesserts.com's activity-based flexible budget in Exhibit 11-11 (see below). Suppose that the company's activity in June is described as follows:

Process hours: 7,500

Production runs: 16

New products tested: 30

Direct material handled (pounds): 40,000

Required:

1. Determine the flexible budgeted cost for each of the following:

a. Indirect material

b. Utilities

c. Inspection

d. Test kitchen

e. Material handling

f. Total overhead cost

2. Compute the variance for setup cost during the month, assuming that the actual setup cost was $3,000

a. Using the activity-based flexible budget.

b. Using DCdesserts.com's conventional flexible budget (Exhibit 11-3 below).

Exhibit 11-11

FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VEW X V fr =$s'scy A B C D E F DCDESSERTS.COM Monthly Flexible Overhead Budget NOUAWNG Cost Process Hours Budgeted Overhead Costs per Hour 6,000 7,500 9,000 Variable overehad costs: Indirect material: 9 Nonstick cooking spray $ 200 $ 12,000 $ 15,000 $ 18,000 10 Waxed paper 0.33 2,000 2,500 3,000 11 Other paper products 0.33 2,000 2,500 3,000 12 Miscellaneous supplies 1.00 6,000 7,500 9,000 13 Indirect labor: maintenance 0.67 4,000 5.000 6,000 14 Utilities 15 Electricity 0.50 3,000 3,750 4,500 16 Natural gas 0.17 1,000 1,250 1.500 17 Total variable overhead cost $ 30,000 $ 37,500 $45,000 18 19 Fixed overhead costs: 20 Indirect labor: 21 Inspection $ 2,200 $ 2,200 $ 2,200 22 Production supervisors 6,000 6,000 6,000 23 Setup specialists 3,000 3,000 3.000 24 Material handling 2,000 2,000 2,000 25 Depreciation: plant and equipment 500 500 500 26 Insurance and property taxes 100 100 100 27 Test kitchen 1,200 1,200 1,200 28 Total fixed overhead cost $ 15,000 $ 15,000 $ 15,000 29 Total overhead cost $ 45,000 $ 52,500 $60,000 an Flexible Overhead Budget READY 145%DCDESSERTS.COM Monthly Flexible Overhead Budget Budgeted Cost Level of Activity Cost Pool I (cost driver: process hours) .... 6,000 7,500 9,000 Indirect material: Nonstick cooking spray .. $ 12,000 $ 15,000 $ 18,000 Waxed paper .. 2,000 2,500 3,000 Other paper products 2,000 2,500 3,000 Miscellaneous supplies 6,000 7,500 9,000 Indirect labor: maintenance .. 4,000 5,000 6,000 Utilities: Electricity .. 3,000 3,750 4,500 Natural gas . 1,000 1,250 1,500 Total of cost pool I .........:4::"."*$4:"*:494:"*""; $ 30,000 $ 37,500 $ 45,000 Cost Pool II (cost driver: production runs) ...........4.4:45454 54.":4:14:::414 8 12 16 Indirect labor: Inspection $ 2,200 $ 3,300 $ 4,400 Setup 3,000 4,500 6,000 Total of cost pool II .. $ 5,200 $ 7,800 $ 10,400 Cost Pool Ill (cost driver: new products tested) 20 30 40 Test kitchen .. $ 1,200 $ 1,800 $ 2,400 Total of cost pool Ill . 1,200 $ 1,800 $ 2,400 Cost Pool IV (cost driver: pounds of material handled) 20,000 30,000 40,000 Material handling $ 2,000 $ 3,000 $ 4,000 Total of cost pool IV .. $ 2,000 $ 3,000 $ 4,000 Cost Pool V (facility level costs) Indirect labor: production supervisors . $ 6,000 $ 6,000 $ 6,000 Depreciation: plant and equipment . 500 500 500 Insurance and property taxes ...." 100 100 100 Total of cost pool V ... $ 6,600 $ 6,600 $ 6,600 Total overhead cost $45,000 $56,700 $68,400