Illustration 7 For the production department of XXL Ltd you are required to: (a)Prepare a fixed budget of overheads; (b)Prepare a flexible budget of overheads at 70% and 110% of budgeted volume; (c)Calculate a departmental hourly rates of overhead absorption as per (a) and (b) above. The budgeted level of activity of the department is 5,000 hours per period and a study of the various items of expenditure reveals the following: $ Sper hr Indirect wages: 0.4 Repairs Upto 2,000 hours 100 For each additional 500 hours up to a total of 4,000 hrs 35 Additional from 4,001 to 5,000 hrs 60 Additional above 5,000 hrs 70 Rent and rates: 350 Power Up to 3,600 hours 0.25 For hours above 3,600 0.2 Consumable supplies: 0.24 Up to 2,500 hours Supervision 400 Additional for each extra 600 hours above 2,500 and up to 4,900 hours 100 Additional above 4,900 hours 150 Up to 5,000 hours 650 Depreciation Above 5,000 hours and up to 6,500 hours 820 Cleaning Up to 4,000 hours 60 Above 4,000 hours 80 Heat and lighng From 2,100 hrs to 3,500 hrs 120 From above 3,500 hrs to 5,000 hrs 150 Above 5,000 hours 175