DEF Municipality uses a standard absorption costing system to control the cost of one of its services, namely the supply of water to its constituents. The fixed budget for the reticulation process show a budgeted total overhead cost of R2,000,000 per period when 50,000 kiloliters of water is distributed, and R2,640,000 per period when 90,000 kiloliters is distributed.
In period 9 when the distribution was 65,000 kiloliters, total real overhead was R2,450,000 (R1,250,000 fixed and R1,200,000 variable). The standard fixed overhead absorption rate is R24 per kiloliter.
a) Using the high-low meathod, determine the following:
(i) The budgeted variable overhead per kiloliter
(ii) The budgeted fixed overhead per kiloliter
b) Determine the following:
(i) The total fixed overhead absorbed in period 9
(ii) The fixed overhead price variance
(iii) The fixed overhead volume variance