n an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 400,000 units of the standard model and 110,000 units of the deluxe model during the coming year. The standard model requires 0.10 direct labor hour per unit, and the deluxe model requires 0.16. The controller has developed the following cost formulas for each of the four overhead items: Cost Formula Maintenance $34,600 + $1.25 DLH Power $0.50 DLH Indirect labor $68,200 + $2.30 DLH Rent $31,700 Required: 1. Prepare an overhead budget for the expected activity level for the coming year. Meliore, Inc.Overhead BudgetFor the Year Ended December 31 Per DLH Budgeted direct labor hours ? Variable costs: Maintenance ? ? Power ? ? Indirect labor ? ? Total variable costs ? Fixed costs: Maintenance ? Indirect labor ? Rent ? Total fixed costs ? Total overhead costs ? 2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products). Meliore, Inc.Overhead BudgetFor the Year Ended December 31 Per DLH Budgeted direct labor hours ? Variable costs: Maintenance ? ? Power ? ? Indirect labor ? ? Total variable costs ? Fixed costs: Maintenance ? Indirect labor ? Rent ? Total fixed costs ? Total overhead costs ? Prepare an overhead budget for production that is 20 percent lower than expected. Meliore, Inc.Overhead BudgetFor the Year Ended December 31 Per DLH Budgeted direct labor hours ? Variable costs: Maintenance ? ? Power ? ? Indirect labor ? ? Total variable costs ? Fixed costs: Maintenance ? Indirect labor ? Rent ? Total fixed costs ? Total overhead costs ?
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.
n an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 400,000 units of the standard model and 110,000 units of the deluxe model during the coming year. The standard model requires 0.10 direct labor hour per unit, and the deluxe model requires 0.16. The controller has developed the following cost formulas for each of the four overhead items:
| Cost Formula | |
| Maintenance | $34,600 + $1.25 DLH |
| Power | $0.50 DLH |
| Indirect labor | $68,200 + $2.30 DLH |
| Rent | $31,700 |
Required:
1. Prepare an overhead budget for the expected activity level for the coming year.
| Per DLH | |||
|---|---|---|---|
| Budgeted direct labor hours | ? | ||
| Variable costs: | |||
| Maintenance | ? | ? | |
| Power | ? | ? | |
| Indirect labor | ? | ? | |
| Total variable costs | ? | ||
| Fixed costs: | |||
| Maintenance | ? | ||
| Indirect labor | ? | ||
| Rent | ? | ||
| Total fixed costs | ? | ||
| Total overhead costs | ? |
2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products).
| Per DLH | |||
|---|---|---|---|
| Budgeted direct labor hours | ? | ||
| Variable costs: | |||
| Maintenance | ? | ? | |
| Power | ? | ? | |
| Indirect labor | ? | ? | |
| Total variable costs | ? | ||
| Fixed costs: | |||
| Maintenance | ? | ||
| Indirect labor | ? | ||
| Rent | ? | ||
| Total fixed costs | ? | ||
| Total overhead costs | ? |
Prepare an overhead budget for production that is 20 percent lower than expected.
| Per DLH | |||
|---|---|---|---|
| Budgeted direct labor hours | ? | ||
| Variable costs: | |||
| Maintenance | ? | ? | |
| Power | ? | ? | |
| Indirect labor | ? | ? | |
| Total variable costs | ? | ||
| Fixed costs: | |||
| Maintenance | ? | ||
| Indirect labor | ? | ||
| Rent | ? | ||
| Total fixed costs | ? | ||
| Total overhead costs | ? |
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