Timothy, SA APrepare an Overhead Budget for the Expected Activity Level for Company

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: $\begin{array}{lc}&\text { Cost Formula }\\\text { Power } & 0.40 \mathrm{X} \\\text { Maintenance } & £ 15,000+0.60 \mathrm{X} \\\text { Indirect labour } & £ 18,000+2.50 \mathrm{X} \\\text { Rent } & £ 20,000\end{array}$
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.