Flexible Budget for Various Levels of Activity Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items: Overhead Item Total Fixed Cost Variable Rate per Direct Labor Hour Maintenance $ 86,000 $0.20 Power 0.45 Indirect labor 140,000 2.10 Rent 35,000 Next year, Palladium expects production to require 90,000 direct labor hours. Required:
Flexible Budget for Various Levels of Activity Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items: Overhead Item Total Fixed Cost Variable Rate per Direct Labor Hour Maintenance $ 86,000 $0.20 Power 0.45 Indirect labor 140,000 2.10 Rent 35,000 Next year, Palladium expects production to require 90,000 direct labor hours. Required:
Flexible Budget for Various Levels of Activity Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items: Overhead Item Total Fixed Cost Variable Rate per Direct Labor Hour Maintenance $ 86,000 $0.20 Power 0.45 Indirect labor 140,000 2.10 Rent 35,000 Next year, Palladium expects production to require 90,000 direct labor hours. Required:
Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items:
Overhead Item
Total Fixed Cost
Variable Rate per Direct Labor Hour
Maintenance
$ 86,000
$0.20
Power
0.45
Indirect labor
140,000
2.10
Rent
35,000
Next year, Palladium expects production to require 90,000 direct labor hours.
Required:
Transcribed Image Text:1. Prepare an overhead budget for the expected level of direct labor hours for the coming year.
Palladium Inc.
Overhead Budget
For the Coming Year
Activity Level
Variable costs:
Rate per Hour
90,000 Hours
Maintenance
Power
Indirect labor
Total variable cost
Fixed costs:
Maintenance
Indirect labor
Rent
Total fixed costs
Total overhead costs
2. Prepare an overhead budget that reflects production that is 15% higher than expected and for production that is 15% lower than expected.
Activity Level
Rate per Hour
Hours
Hours
Variable costs:
Maintenance
%24
Power
Indirect labor
Total variable costs
Fixed costs:
Maintenance
%24
Indirect labor
Rent
Total fixed costs
Total overhead costs
Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.
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