Flexible budgets; predetermined OH rates The Splash makes large fiberglass swimming pools and uses machine hours and direct labor hours to apply overhead in the Production and Installation departments, respectively. The monthly cost formula for overhead in Production is y = $7,950 + $4.05 MH; the overhead cost formula in Installation is y = $6,150 + $14.25 DLH. These formulas are valid for a relevant range of activity up to 3,600 machine hours in Production and 5,400 direct labor hours in Installation. Each pool is estimated to require 15 machine hours in Production and 36 hours of direct labor in Installation. Expected capacity for the year is 72 pools. c. Prepare a budget for next month’s variable, fixed, and total overhead costs for each department assuming that expected production is 5 pools. d. Calculate the total overhead cost to be applied to each pool scheduled for production in the coming month if expected capacity is used to calculate the predetermined OH rates.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Flexible budgets; predetermined OH rates
The Splash makes large fiberglass swimming pools and uses machine hours and direct labor hours to apply
These formulas are valid for a relevant range of activity up to 3,600 machine hours in Production and 5,400 direct labor hours in Installation.
Each pool is estimated to require 15 machine hours in Production and 36 hours of direct labor in Installation. Expected capacity for the year is 72 pools.
c. Prepare a budget for next month’s variable, fixed, and total overhead costs for each department assuming that expected production is 5 pools.
d. Calculate the total overhead cost to be applied to each pool scheduled for production in the coming month if expected capacity is used to calculate the predetermined OH rates.
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