Budgeted purification fixed, Financial Accounting

XYZ Municipality purifies water before it enters the reticulation network. There are presently 3 purification processes available to the municipality. These processes sre referred to as A, B and C. Budgeted costs and purification information for the coming period is as follows:








(all per 1,000 kiloliters)


Direct materials

R 120

R 100

R 60


Direct labour

R 42

R 42

R 28


Equipment hours





Labour hours





Output in 1,000 kl





They are usually produced in production runs of 10,000 kl and distributed to consumers in batches of 5,000 kl. The municipality uses a cost plus 20% mark-up in order to measure prices. Budgeted purification fixed overhead is absorbed using equipment hour rate, and budgeted overhead for the coming period has been analyzed as follows:

Rent, supervision, power and depreciation

R 260,000

Set-up costs

R 150,000

Goods (chemicals) inwards

R 96,000

Quality inspection

R 52,500


R 97,500


R 656,000


Budgeted equipment hours for the period is 16,400 hours


    (i)   Measure the budgeted total cost per 1,000 kl for every process, showing clearly the prime

       cost, overhead cost and total cost.

(ii)  Using your total cost estimates from (a) (i) and a mark-up of 20% on cost, measure the

       budgeted price per 1,000 kl of every of the 3 processes.


Posted Date: 3/19/2013 6:18:35 AM | Location : United States

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