The Splash makes large fiberglass swimming pools and uses machine hours and direct labor hours to apply overhead in the Production and Installation departments, respectively. The monthly cost formula for overhead in Production is y = $7,950 + $4.05 MH; the overhead cost formula in Installation is y = $6,150 + $14.25 DLH. These formulas are valid for a relevant range of activity up to 6,000 machine hours in Production and 9,000 direct labor hours in Installation.

Each pool is estimated to require 25 machine hours in Production and 60 hours of direct labor in Installation. Expected capacity for the year is 120 pools.

a. Prepare a flexible budget for Production at possible annual capacities of 2,500, 3,000, and 3,500 machine hours. Prepare a flexible budget for Installation at possible annual capacities of 6,000, 7,000, and 8,000 machine hours.

b. Prepare a budget for next month’s variable, fixed, and total overhead costs for each department assuming that expected production is eight pools.

c. Calculate the total overhead cost to be applied to each pool scheduled for production in the coming month if expected capacity is used to calculate the predetermined OH rates.