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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Use the following information for Problems 9-67 through 9-69:

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:

Chapter 9, Problem 67P, Use the following information for Problems 9-67 through 9-69: Ladan Suriman, controller for Healthy

Problem 9-67 Overhead Budget for a Particular Level of Activity

Refer to the information for Healthy Pet Company above.

Required:

  1. 1. Calculate the total direct labor hours required for the production of 80,000 bags of BasicDiet and 80,000 bags of SpecialDiet.
  2. 2. Prepare an overhead budget for the expected activity level (calculated in Requirement 1) for the coming year.

1.

To determine

Compute direct labor hours.

Explanation

Overhead Budget:

Overhead budget is a part of operating budget which computes production cost expected to incur within a period other than cost of material and labor.

Computation of direct labor hours:

ParticularsAmount ($)
Product BD: 
Expected units (A)80,000
Labor hours per unit (B)0.2
Total labor hours (A×B)

2.

To determine

Present an overhead budget.

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