Sami Stitches Ltd produces two types of sewing machines, a standard model and a deluxe model. The budgeted factory overhead costs for the production operation during 2017 are as follows:

Variable costs: Indirect materials Indirect labour Electricity Other Fixed costs: Production manager’s salary Depreciation Insurance Miscellaneous

$8.00 per machine hour $0.60 per machine hour $0.20 per machine hour $0.20 per machine hour $100000 $45000 $30000 $13 160

Production of 18 000 standard sewing machines and 12 000 sewing machines is budgeted for 2017. Each standard machine requires 2.4 machine hours, and each deluxe machine requires only 2 machine hour because of the use of component parts. It expect to sell all machines produced.

Required

A. Prepare a factory overhead budget for 2017 based on the estimated production level.

B. Calculate the predetermined overhead rate based on machine hours.