Classics, SA APrepare an Overhead Budget for the Expected Activity Level for Company

question 25

Essay

Classics, SA., uses a flexible budget for overhead costs. The company expects to produce 20,000 units of the product it manufactures. Half of the units require 0.50 direct labour hours per unit. The remainder requires 0.75 direct labour hours per unit. The cost formulas for each of the four overhead items is as follows: $\begin{array}{lll}&\text { Fixed Cost } & \text { Variable Cost } \\\text { Power } & £ 1,000 & £ 0.25 \\\text { Maintenance } & £ 5,000 & £ 0.40 \\\text { Indirect labour } & £ 8,000 & £ 2.00 \\\text { Rent } & £ 12,000 &\end{array}$
a.Prepare an overhead budget for the expected activity level for the coming year.
b.Prepare an overhead budget that reflects production that is 10 per cent higher than expected.

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Definitions:

X

Typically used to represent an unknown variable in mathematics.

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A term referring to the quantity of matter in a body, relevant in physics for calculating gravitational forces and inertia.

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The smallest and innermost planet in the Solar System, known for its swift orbit around the sun.

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