Flexible budget for factory overhead
Presented below are the monthly factory overhead cost budget (at normal capacity of 10,000 units or 30,000 direct labc hours) and the production and cost data for a month. The predetermined overhead rate is based on normal capacity.

Required:
1. Assuming that variable costs will vary in direct proportion to the change in volume, prepare a flexible budget for production levels of 80%, 90%, and 110% of normal capacity. Also determine the rate for application of factory overhead to work-in-process at each level of volume in both units and direct labor hours.
2. Prepare a flexible budget for production levels of 80%. 90%, and 110%. assuming that variable costs will vary in direct proportion to the change in volume, but with the following exceptions. (Hint: Set up a third category for semi variable/ fixed expenses.)
a. At 105% of capacity, another supervisor will be needed at a salary of $21,000 annually.
b. At 85% of capacity, the repairs expense will drop to onehalf of the amount at 100% capacity.
c. At 90% of capacity, one part-time maintenance worker, earning $9,000 a year, will be laid off.
d. At 110% of capacity, a machine not normally in use and on which no depreciation is normally recorded will be used in production. Its cost was $18,000, it has a ten year life, and straight-line depreciation will be taken.

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Factory Overhead Cost Budget Fixed cost: Depreciation on building and machinery.... $1,800 Taxes on building and machinery...... 750 Insurance on building and machinery. 800 Superintendent's salary..... 2,200 Supervisors' salaries..... 3,100 $10,150 Maintenance wages.. 1,500 Variable cost: $ 600 Repairs ..... Maintenance supplies..... 450 Other supplies...... 300 Payroll taxes 1,200 Small tools....... 600 3,150 Total standard factory overhead... $13,300