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. Basic Diet is a standard mixture for healthy dogs. Special Diet 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 80,000 bags of each product during the coming year. Basic Diet requires 0.20 direct labor hour per bag, and Special Diet requires 0.30 direct labor hour per bag. Ladan has developed the following fixed and variable costs for each of the four overhead items:

Required:

1. Calculate the total direct labor hours required for the production of 80,000 bags of Basic Diet and 80,000 bags of Special Diet.

2. Prepare an overhead budget for the expected activity level (calculated in Requirement 1) for the coming year.

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Overhead Item Maintenance Power Indirect labor Rent Fixed Cost $57,250 43,500 39,000 Variable Rate per Direct Labor Hour $0.50 0.40 2.10