Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items: Overhead Item Total Fixed Cost Variable Rate per Direct Labor Hour Maintenance $ 86,000           $0.20                    Power   0.45                    Indirect labor 140,000           2.10                    Rent 35,000             Next year, Palladium expects production to require 90,000 direct labor hours. Required: 1. Prepare an overhead budget for the expected level of direct labor hours for the coming year.

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Chapter1: Financial Statements And Business Decisions
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Flexible Budget for Various Levels of Activity

Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items:

Overhead Item Total Fixed Cost Variable Rate per Direct
Labor Hour
Maintenance $ 86,000           $0.20                   
Power   0.45                   
Indirect labor 140,000           2.10                   
Rent 35,000            

Next year, Palladium expects production to require 90,000 direct labor hours.

Required:

1. Prepare an overhead budget for the expected level of direct labor hours for the coming year.

Palladium Inc.
Overhead Budget
For the Coming Year
Variable costs: Rate per Hour Activity Level
90,000 Hours
 
Maintenance $fill in the blank 336531fff03bfc2_1 $fill in the blank 336531fff03bfc2_2  
Power fill in the blank 336531fff03bfc2_3 fill in the blank 336531fff03bfc2_4  
Indirect labor fill in the blank 336531fff03bfc2_5 fill in the blank 336531fff03bfc2_6  
Total variable cost   $fill in the blank 336531fff03bfc2_7  
       
Fixed costs:      
Maintenance   $fill in the blank 336531fff03bfc2_8  
Indirect labor   fill in the blank 336531fff03bfc2_9  
Rent   fill in the blank 336531fff03bfc2_10  
Total fixed costs   $fill in the blank 336531fff03bfc2_11  
Total overhead costs   $fill in the blank 336531fff03bfc2_12  
       

2. Prepare an overhead budget that reflects production that is 15% higher than expected and for production that is 15% lower than expected.

                                           Activity Level
  Rate per Hour fill in the blank 66eb4800efee05a_1
Hours
fill in the blank 66eb4800efee05a_2
Hours
Variable costs:      
  Maintenance $fill in the blank 66eb4800efee05a_3 $ fill in the blank 66eb4800efee05a_4 $ fill in the blank 66eb4800efee05a_5
  Power fill in the blank 66eb4800efee05a_6 fill in the blank 66eb4800efee05a_7 fill in the blank 66eb4800efee05a_8
  Indirect labor fill in the blank 66eb4800efee05a_9 fill in the blank 66eb4800efee05a_10 fill in the blank 66eb4800efee05a_11
  Total variable costs   $fill in the blank 66eb4800efee05a_12 $fill in the blank 66eb4800efee05a_13
Fixed costs:      
  Maintenance   $ fill in the blank 66eb4800efee05a_14 $ fill in the blank 66eb4800efee05a_15
  Indirect labor   fill in the blank 66eb4800efee05a_16 fill in the blank 66eb4800efee05a_17
  Rent   fill in the blank 66eb4800efee05a_18 fill in the blank 66eb4800efee05a_19
  Total fixed costs   $fill in the blank 66eb4800efee05a_20 $fill in the blank 66eb4800efee05a_21
Total overhead costs   $fill in the blank 66eb4800efee05a_22 $fill in the blank 66eb4800efee05a_23
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