QUESTION 2 Sarah Lindsay, controller for Cold Cream Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of frozen desserts: Icy and Tasty. The two desserts use common raw materials in different proportions. The company expects to produce 200,000 L of each product during the coming year. Icy requires 0.25 direct labour hours per litre, and Tasty requires 0.30. Sarah has developed the following fixed and variable costs for each of the four overhead items: Overhead Item Fixed Cost Variable Rate per DLH Maintenance $52,000 $1.20 Power 1.50 Indirect labour 79,500 4.80 Rent 54,000 Required: (hint: Calculate the total hours need and applied it to all variable rate) A. Prepare an overhead budget for the expected activity level for the coming year. B. Prepare an overhead budget that reflects production that is 10% higher than expected (for both products). C. Prepare an overhead budget that reflects production that is 10% lower than expected (for both products).
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.
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QUESTION 2
Sarah Lindsay, controller for Cold Cream Company, has been instructed to develop a flexible budget for
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