Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items: Overhead Item Total Fixed Cost Variable Rate per Direct Labor Hour Maintenance $ 86,000 $0.20 Power 0.45 Indirect labor 140,000 2.10 Rent 35,000 Next year, Palladium expects production to require 90,000 direct labor hours. Required: 1. Prepare an overhead budget for the expected level of direct labor hours for the coming year. Palladium Inc. Overhead Budget For the Coming Year Variable costs: Rate per Hour Activity Level 90,000 Hours Maintenance $ $ Power Indirect labor Total variable cost $ Fixed costs: Maintenance $ Indirect labor Rent Total fixed costs $ Total overhead costs $ 2. Prepare an overhead budget that reflects production that is 15% higher than expected and for production that is 15% lower than expected. Activity Level Rate per Hour Hours Hours Variable costs: Maintenance $ $ $ Power Indirect labor Total variable costs $ $ Fixed costs: Maintenance $ $ Indirect labor Rent Total fixed costs $ $ Total overhead costs $ $ Feedback

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 63E: Use the following information for Exercises 9-63 and 9-64: Palladium Inc. produces a variety of...

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Palladium Inc. produces a variety of household cleaning products. Palladium’s controller has developed standard costs for the following four overhead items:

Overhead Item	Total Fixed Cost	Variable Rate per Direct Labor Hour
Maintenance	$ 86,000	$0.20
Power		0.45
Indirect labor	140,000	2.10
Rent	35,000

Next year, Palladium expects production to require 90,000 direct labor hours.

Required:

1. Prepare an overhead budget for the expected level of direct labor hours for the coming year.

Palladium Inc.
Overhead Budget
For the Coming Year
Variable costs:	Rate per Hour	Activity Level 90,000 Hours
Maintenance	$	$
Power
Indirect labor
Total variable cost		$

Fixed costs:
Maintenance		$
Indirect labor
Rent
Total fixed costs		$
Total overhead costs		$

2. Prepare an overhead budget that reflects production that is 15% higher than expected and for production that is 15% lower than expected.

Activity Level
	Rate per Hour	Hours	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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Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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