Ladan Suriman, controller for Healthy Pet Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of dog food. BasicDiet is a standard mixture for healthy dogs. SpecialDiet is a reduced protein formulation for older dogs with health problems. The two dog foods use common raw materials in different proportions. The company expects to produce 80,000 bags of each product during the coming year. BasicDiet requires 0.20 direct labor hour per bag, and SpecialDiet requires 0.30 direct labor hour per bag. Ladan has developed the following fixed and variable costs for each of the four overhead items: Overhead Item Fixed Cost Variable Rate per Direct Labor Hour Maintenance $ 57,250 $0.50 Power 0.40 Indirect labor 43,500 2.10 Rent 39,000 Required: 1. Calculate the total direct labor hours required for the production of 80,000 bags of BasicDiet and 80,000 bags of SpecialDiet. fill in the blank acd3200b0fa803e_1 hours 2. Prepare an overhead budget for the expected activity level (calculated in Requirement 1) for the coming year.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Ladan Suriman, controller for Healthy Pet Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of dog food. BasicDiet is a standard mixture for healthy dogs. SpecialDiet is a reduced protein formulation for older dogs with health problems. The two dog foods use common raw materials in different proportions. The company expects to produce 80,000 bags of each product during the coming year. BasicDiet requires 0.20 direct labor hour per bag, and SpecialDiet requires 0.30 direct labor hour per bag. Ladan has developed the following fixed and variable costs for each of the four overhead items:
| Overhead Item | Fixed Cost | Variable Rate per Direct Labor Hour |
| Maintenance | $ 57,250 | $0.50 |
| Power | 0.40 | |
| Indirect labor | 43,500 | 2.10 |
| Rent | 39,000 |
1. Calculate the total direct labor hours required for the production of 80,000 bags of BasicDiet and 80,000 bags of SpecialDiet.
fill in the blank acd3200b0fa803e_1 hours2. Prepare an overhead budget for the expected activity level (calculated in Requirement 1) for the coming year.
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