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 Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
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