Question 2: Royal plc operates a system of flexible budgetary control. It classifies each cost item into either fixed, variable, stepped or mixed based on the following costs incurred at two different levels of activity, 50,000 units and 80,000 units respectively. Budget for the year 2023 Activity level 50% 80% Production Unit 100,000 160,000 f f Direct costs : Labour 210,000 336,000 - expenditure 20,000 32,000 Overheads: rates 25,000 25,000 - depreciation 14,000 16,400 - supervision 10,000 20,000 - insurance 4,000 4,000 - indirect wages 21,000 29,400 - maintenance 42,000 60,000 - cleaning 18,000 18,000 - canteen 30,000 42,000 - consumables 10,000 16,000 - power 10,000 14,800 - Admin 50,000 50,000 **Represents 1 supervisor. An additional supervisor at the same rate is required when the activity level reaches 75%. Required: (a) Identify each cost heading as either fixed, variable or semi-variable. b) Define Sunk cost. (21 marks) (4 marks) (25 marks)