Explore BrainMass
Share

Explore BrainMass

    Flexible budget

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    I need help with this problem. Thanks.

    Gibraler Insurance Company uses a flexible overhead budget for its application-processing department. The film offers five types of policies, with the following standard hours allowed for clerical processing.
    Automobile.........1hr
    Renter's...........1hr
    Homeowner's........2 hr
    Health.............2 hr
    Life...............5 hr

    The following numbers of insurance applications were processed during July.
    Automobile............. 250
    Renter's............... 200
    Homeowner's............ 100
    Health................. 400
    Life................... 200
    The controller estimates that the variable-overhead rate in the application-processing department is $4.00 per hour, and that fixed-overhead costs will amount to $2,000 per month.

    1. How many standard clerical hours are allowed in July, give actual application activity?
    2. Why would it not be sensible to base the company's flexible budget on the number of applications processed instead of the number of clerical hours allowed?
    3. Construct a formula flexible overhead budget for the company.
    4. What is the flexible budget for total overhead cost in July?

    © BrainMass Inc. brainmass.com October 9, 2019, 10:12 pm ad1c9bdddf
    https://brainmass.com/business/budgets/standard-hours-flexible-budget-212237

    Solution Preview

    1. How many standard clerical hours are allowed in July, give actual application activity?

    Standard hours allowed = Number of application X standard hour per application
    We calculate the standard hours allowed for each department
    Automobile = 250 applications X 1 hr per application = 250 standard hours
    Renter = 200X1 = 200 standard hours
    Homeowner = ...

    Solution Summary

    The solution explains some calculations relating to flexible budget.

    $2.19