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1. 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 the deluxe model. Meliore expects to produce 400,000 units of the standard model and 140,000 units of the deluxe model during the coming year. The standard model requires 0.10 direct labor hour per unit, and the deluxe model requires 0.16. The controller has developed the following cost formulas for each of the four overhead items:

   	Cost Formula
   Maintenance	$34,300 + $1.25 DLH
   Power	$0.50 DLH
   Indirect labor	$68,500 + $2.30 DLH
   Rent	$31,700

   Required:

   1. Prepare an overhead budget for the expected activity 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 reflects production that is 10 percent higher than expected (for both products).

   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 percent lower 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			$

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