Chapter 11, Problem 27E

Evening Star, Inc. produces binoculars of two quality levels: field and professional. The field model requires three direct-labor hours, while the professional binoculars require five hours. The firm uses direct-labor hours for flexible budgeting.

Required:

1. 1. How many standard hours are allowed in May, when 200 field models and 300 professional binoculars are manufactured?
2. 2. Suppose the company based its flexible overhead budget for May on the number of binoculars manufactured, which is 500. What difficulties would this approach cause?