Question 7: Control systems 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: Cost Formula are as shown below: Power = 0.40X Maintenance =R15,000 + 0.60X Indirect labour =R18,000 + 2.50X Rent =R20,000 Required: 7.1 Prepare an overhead budget for the expected activity level for the coming year. 7.2 Prepare an overhead budget that reflects production that is 25 percent lower than expected.