Rensing Groomers is in the dog-grooming business. Its operating costs are described by the following equations:

Grooming supplies (variable) …. y = $0 + $5x

Direct labor (variable) ………..… y = $0 + $14x

Overhead (mixed) ……………… y = $10,000 + $1x

Milo, the owner, has determined that direct labor is the cost driver for all three categories of costs.

Instructors Note: Above equations "translated" for us "math-challenged". The "grooming supplies" equation means that there is -0- fixed amount but the variable part of this cost is $5 times the activity. In the last one, "overhead" has a $10,000 fixed component plus a ($1 x activity level) variable component.

Instructions

Prepare a flexible budget for activity levels of 550, 600, and 700 direct labor hours.