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HILL COMPANY Budget Report Assembling Department For the Month Ended August 31,

ID: 2424649 • Letter: H

Question

HILL COMPANY
Budget Report
Assembling Department
For the Month Ended August 31, 2014

Difference


Manufacturing Costs


Budget


Actual

Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)

$51,660

$50,560

$1,100

59,220

56,530

2,690

25,830

25,950

120

23,940

23,480

460

18,270

18,170

100

10,080

10,180

100

189,000

184,870

4,130

12,480

12,480

–0–

18,420

18,420

–0–

5,990

5,990

–0–

36,890

36,890

–0–

$225,890

$221,760

$4,130

(a)

Hill Company uses budgets in controlling costs. The August 2014 budget report for the company’s Assembling Department is as follows.

HILL COMPANY
Budget Report
Assembling Department
For the Month Ended August 31, 2014

Difference


Manufacturing Costs


Budget


Actual

Favorable (F)
Unfavorable (U)
Neither Favorable
nor Unfavorable (N)

Variable costs    Direct materials

$51,660

$50,560

$1,100

F    Direct labor

59,220

56,530

2,690

F    Indirect materials

25,830

25,950

120

U    Indirect labor

23,940

23,480

460

F    Utilities

18,270

18,170

100

F    Maintenance

10,080

10,180

100

U       Total variable

189,000

184,870

4,130

F Fixed costs    Rent

12,480

12,480

–0–

N    Supervision

18,420

18,420

–0–

N    Depreciation

5,990

5,990

–0–

N       Total fixed

36,890

36,890

–0–

N Total costs

$225,890

$221,760

$4,130

F
The monthly budget amounts in the report were based on an expected production of 63,000 units per month or 756,000 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 61,000 units were produced.

Explanation / Answer

The formula = Total fixed cost + variable cost per unit = $ 36,890 + variable costs $ 3 per unit.

Budgeted variable cost per unit = 189,000 / 63,000 = $ 3.