Sam and Anna discuss what assumptions are reasonable so that she can estimate the factory overhead costs for 2019 using incremental budgeting. Use the total factory overhead cost for 2018 (see Table 12.6) to calculate the Smart Sports’ factory overhead rate for 2019 by applying a simple blanket rate.

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Table 12.6 2019 budget: factory expenditure 2018 expenditure 2019 assumptions Hire of machinery 10,600 Same as 2018 Supervisor salary 30,000 Increase by 5% Rent 40,000 Increase by 3% Factory depreciation 3,000 Same as 2018 Electricity 1,500 Increase by 10%