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

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.Prepare an annual budget for the activity,assuming that all of the capacity of the activity is used (use kilometres as the activity driver).Identify which resources you would treat as fixed costs and which would be viewed as variable costs.