Question

RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 31, 2017
			Difference
Manufacturing Costs	Budget	Actual	Favorable F Unfavorable U
Variable costs
Direct materials	$ 48,000	$ 47,000	$1,000	F
Direct labor	54,000	51,200	2,800	F
Indirect materials	24,000	24,200	200	U
Indirect labor	18,000	17,500	500	F
Utilities	15,000	14,900	100	F
Maintenance	12,000	12,400	400	U
Total variable	171,000	167,000	3,800	F
Fixed costs
Rent	12,000	12,000	-0-
Supervision	17,000	17,000	-0-
Depreciation	6,000	6,000	-0-
Total fixed	35,000	35,000	-0-
Total costs	$206,000	$202,000	$3,800	F

The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August because only 58,000 units were produced.

Instructions

a)  

Prepare a budget report for August using flexible budget data.

(b)  

In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August.

Answer 1