P10-3A State total budgeted cost formula, and prepare flexible budget s for 2 ti

Question

P10-3A State total budgeted cost formula, and prepare flexible budget s for 2 time periods Ratchet Company uses budgets in controlling costs. The August 2017 budget report for the company's Assembling Department is as follows. Ratchet Company Budget Report Assembling Department For the Month Ended August 31, 2017 Difference Favorable F Manufacturing Cost Budget Actual 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     167,200 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 $ 202,200 $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.

Explanation / Answer

Cost Details Aug 2017 Difference Favorable F Manufacturing Cost Budget Budgeted Variable cost /Unit Actual Actulal Variable cost/unit Unfavorable U Units Produced         60,000.00      58,000.00 Variable costs    Direct materials         48,000.00 0.80      47,000.00            0.81 $1,000 F    Direct labor         54,000.00 0.90      51,200.00            0.88 2,800 F    Indirect materials         24,000.00 0.40      24,200.00            0.42 200 U    Indirect labor         18,000.00 0.30      17,500.00            0.30 500 F    Utilities         15,000.00 0.25      14,900.00            0.26 100 F    Maintenance         12,000.00 0.20      12,400.00            0.21 400 U      Total variable       171,000.00 2.85    167,200.00            2.88 3,800 F Fixed costs    Rent         12,000.00      12,000.00 0    Supervision         17,000.00      17,000.00 0    Depreciation           6,000.00       6,000.00 0      Total fixed         35,000.00      35,000.00 0 Total costs $ 206,000 $ 202,200 $3,800 F Flexible Budget Report for Sep 2017, Manufacturing Cost Flexible Budget Budgeted Variable cost /Unit Actual Actulal Variable cost/unit Unfavorable U Units Produced         68,000.00      68,000.00 Variable costs    Direct materials         54,400.00 0.80      61,715.86            0.91     7,315.86 U    Direct labor         61,200.00 0.90      67,230.90            0.99 6,031 U    Indirect materials         27,200.00 0.40      31,777.10            0.47     4,577.10 U    Indirect labor         20,400.00 0.30      22,979.31            0.34     2,579.31 U    Utilities         17,000.00 0.25      19,565.24            0.29     2,565.24 U    Maintenance         13,600.00 0.20      16,282.48            0.24     2,682.48 U      Total variable       193,800.00 2.85    219,550.90            3.23    25,750.90 U Fixed costs    Rent         12,000.00      12,000.00 0    Supervision         17,000.00      17,000.00 0    Depreciation           6,000.00       6,000.00 0      Total fixed         35,000.00      35,000.00 0 Total costs       228,800.00    254,550.90    25,750.90 F

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