Rhythm & Blues is a recording studio in Geelong. It budgets and applies overhead costs on the basis of production time. The studio's accountant anticipates 10 000 hours of production time next year. The following overhead amounts have been budgeted for next year:

Variable overhead ................................................... $40 000

Fixed overhead ....................................................... $90 000

Required:

1. Draw two graphs-one for variable overhead and one for fixed overhead. The variable on the horizontal axis of each graph should be production time, in hours, ranging from 5000 to 15 000 hours. The variable on the vertical axis of each graph should be overhead cost (variable or fixed). Each graph should include two lines-one for the flexible budget amount of overhead and one for applied overhead.

2. Write a brief memo to Rhythm & Blues' general manager, explaining the graphs, so that she will understand the concepts of budgeted and applied overhead?