Question

Palladium Inc. produces a variety of household cleaning products. Palladium's controller has developed standard costs for the following four overhead items: Overhead Total Fixed Cost Variable Rate per Item Direct Labor Hour Maintenance $86,200 $0.20 Power 0.55 Indirect labor 139,200 2.20 Rent 35,300 Next year, Palladium expects production to require 80,000 direct labor hours. Required: 1. Prepare an overhead budget for the expected level of direct labor hours for the coming year. 2. Prepare an overhead budget that reflects production that is 13% higher than expected, and for production that is 13% lower than expected. 1. Prepare an overhead budget for the expected level of direct labor hours for the coming year. (Note: Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.) Palladium Inc. Overhead Budget For the Coming Year 1 Formula Activity Level: 80,000 Hours 2 Variable costs: 3 4 5 6 7 Fixed costs: 8 9 10 11 12 2. Prepare an overhead budget that reflects production that is 13% higher than expected, and for production that is 13% lower than expected. (Note: Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.) Palladium Inc. Overhead Budget For the Coming Year 1 Formula Activity Level: 13% higher Activity Level: 13% lower 2 Variable costs: 3 4 5 6 7 Fixed costs: 8 9 10 11 12

Answer 1

1

Palladium Inc
Overhead Budget
For coming Year
	Activity level 80,000 Hour
Variable cost
Maintenance	16000
Power	44000
Indirect labor	176000
Total variable cost		236000
Fixed cost
Maintenance	86200
Indirect labor	139200
Rent	35300
Total Fixed cost		260700
Total Overhead		496700

2

Palladium Inc
Overhead Budget
For coming Year
	Activity level 13% higher	Activity level 13% Lower
Variable cost
Maintenance	18080	13920
Power	49720	38280
Indirect labor	198880	153120
Total variable cost	266680	205320
Fixed cost
Maintenance	86200	86200
Indirect labor	139200	139200
Rent	35300	35300
Total Fixed cost	260700	260700
Total Overhead	527380	466020

Working notes for the above answer is as under