Flexible Budget

In an attempt to improve budgeting, the controller for Meliore,Inc., has developed a flexible budget for overhead costs. Meliore,Inc., makes two types of products, the standard model and thedeluxe model. Meliore expects to produce 400,000 units of thestandard model and 120,000 units of the deluxe model during thecoming year. The standard model requires 0.05 direct labor hour perunit, and the deluxe model requires 0.08. The controller hasdeveloped the following cost formulas for each of the four overheaditems:

	CostFormula
Maintenance	$34,300 + $1.25 DLH
Power	$0.50 DLH
Indirect labor	$68,200 + $2.30 DLH
Rent	$31,100

Required:

1. Prepare an overhead budget for the expectedactivity level for the coming year.

Meliore, Inc.
Overhead Budget
For the Year Ended December 31
	Per DLH
Budgeted direct labor hours		DLH
Variable costs:
Maintenance	$	$
Power
Indirect labor
Total variable costs			$
Fixed costs:
Maintenance		$
Indirect labor
Rent
Total fixed costs
Total overhead costs			$

2. Prepare an overhead budget that reflectsproduction that is 10 percent higher than expected (for bothproducts).

Meliore, Inc.
Overhead Budget
For the Year Ended December 31
	Per DLH
Budgeted direct labor hours		DLH
Variable costs:
Maintenance	$	$
Power
Indirect labor
Total variable costs			$
Fixed costs:
Maintenance		$
Indirect labor
Rent
Total fixed costs
Total overhead costs			$

Prepare an overhead budget for production that is 20 percentlower than expected.

Meliore, Inc.
Overhead Budget
For the Year Ended December 31
	Per DLH
Budgeted direct labor hours		DLH
Variable costs:
Maintenance	$	$
Power
Indirect labor
Total variable costs			$
Fixed costs:
Maintenance		$
Indirect labor
Rent
Total fixed costs
Total overhead costs			$