Refer to the information for Healthy Pet Company on the previous page. Assume that Healthy Pet actually produced 120,000 bags of BasicDiet and 100,000 bags of SpecialDiet. The actual overhead costs incurred were as follows:

Ladan Suriman, controller for Healthy Pet Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of dog food. BasicDiet is a standard mixture for healthy dogs. SpecialDiet is a reduced protein formulation for older dogs with health problems. The two dog foods use common raw materials in different proportions. The company expects to produce 100,000 bags of each product during the coming year. BasicDiet requires 0.30 direct labor hours per bag, and SpecialDiet requires 0.40 direct labor hours per bag. Ladan has developed the following fixed and variable costs for each of the four overhead items:

Required:
1. Calculate the number of direct labor hours budgeted for actual production of the two products.
2. Prepare a performance report for the period based on actual production.
3. Based on the report, would you judge any of the variances to be significant? Can you think of some possible reasons for the variances?

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Maintenance Power $58,760 54,150 Indirect labor Rent $161,000 42,000 Overhead ltem Maintenance Power Indirect labor Rent Fixed Cost $21,000 Variable Rate per Direct Labor Hour $0.50 0.70 1.60 38,500 42,000