Timothy, SA., uses a flexible budget for overhead costs. The company expects to produce 40,000 units of the product it manufactures. Each unit requires 0.40 direct labour hours. The cost formulas for each of the four overhead items (where X is measured in direct labour hours) is as follows: 
Required:
a.
Prepare an overhead budget for the expected activity level for the coming year.
b.
Prepare an overhead budget that reflects production that is 25 per cent lower than expected.
Definitions:
Epigenetic View
Theory that development is the result of an ongoing, bidirectional interchange between heredity and environment.
Heredity
The passing on of physical or mental characteristics genetically from one generation to another.
Interchange
The act of reciprocally exchanging ideas, goods, or services between parties.
Epigenetic View
A perspective in biology and psychology that emphasizes the role of genes and their interaction with the environment in determining individual characteristics and behaviors.
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