Allsorts Insurance Company uses a flexible overhead budget for its New Policy Department firm offers five types of policy, with the following standard hours allowed per policy for clerical possessing?

Health ........................................ 1 hour

Life ....................................... 1.5 hours

Automobile ................................ 2 hours

Renter ....................................... 2 hours

Homeowner ............................... 5 hours

The following numbers of insurance applications were processed during July:

Health ...................................... 375

Life ......................................... 300

Automobile ................................ 150

Renter ...................................... 600

Homeowner ............................... 300

The accountant estimates that the variable overhead rate in the application processing department is $5 per hour, and that fixed overhead costs will amount to $3000 per month.

Required:

1. Calculate the number of standard clerical hours allowed in July, given the number of applications processed.

2. Explain why the company's flexible budget should be based on the number of clerical hours allowed rather than on the number of applications processed.

3. Construct a formula flexible overhead budget for the company.

4. What is the flexible budget for total overhead cost in July?