Sarah Lindsay, Controller for Cold Cream Company, Has Been Instructed

Essay

Sarah Lindsay, controller for Cold Cream Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of frozen desserts: Icy and Tasty. The two desserts use common raw materials in different proportions. The company expects to produce 200,000 L of each product during the coming year. Icy requires 0.25 direct labour hours per litre, and Tasty requires 0.30. Sarah has developed the following fixed and variable costs for each of the four overhead items:

-Refer to the Figure.Assume that the company uses only 90% of the activity capacity.The actual costs incurred at this level were as follows:
$$\begin{array} { l r } \text { Salaries } & \$ 252,000 \\\text { Lease } & 36,000 \\\text { Crates } & 200,000 \\\text { Fuel } & 20,400\end{array}$$ A. What is the budget for this level of activity?
B. Prepare a performance report.