You suggest that the Villige Pharmacy should use aflexible budget to assist decision making, planning andcontrol.
The company expects to issue prescriptions 20,000 overthe coming year.
Assuming that the first 10,000 prescriptions require0.10 direct labour hours to dispense and the remainder require 0.15direct labour hours and that overheads are absorbed on the basis ofdirect labour hours.
The budgeted semi-variable costs for each of the fouroverhead items are split as follows:
| Fixed Cost | Variable Cost |
Communications / telephone | £ 1,000 | £0.025 |
Security | £ 5,000 | £0.04 |
Indirect labour | £ 8,000 | £2.00 |
Insurance | £12,000 | |
Prepare an overhead budget for the expected activitylevel for the coming year.
Prepare an overhead budget that reflects activity thatis 10 per cent higher than expected.
