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Question - Stu Barnard, controller for Apling Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of freezer desserts: Crystal and Cube. The two desserts use common raw materials in different proportions. The company expects to produce 200,000 gallons of each product during the coming year. Crystal requires 0.25 direct labor hour per gallon and Cube requires 0.30. Stu 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 Labor
79,500
4.80
Rent
54,000
Required:
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 percent higher than expected (for both products).
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