Problem 22-3A (part level submission) Hill Company uses budgets in controlling c

Question

Problem 22-3A (part level submission) 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 Favorable (F Unfaverable (U) Neither Faverable Cests Variable costs Direct materials Direct labor Indirect materials Indirect labor Utilities $49,410 $48,410 55,570 26,230 26,400 24,400 23,980 21,350 21,160 $1,000 F 2,990 F 170 U 420 F 190 F 58,560 Total variable 186,050 181,810 4,240 F Fixed costs -0-N -0-N 0-N -0-N 240 F Rent 10,070 10,070 18,160 18,160 6,590 34.820 34,820 220,870 $216,630 6,590 Total fixed Total costs The monthly budget amounts in the report were based on an expected production of 61,000 units per month or 732,000 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 59,000 units were produced Your answer is correct State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.) 4,820variable costs of The formula 3.05 per unit.

Explanation / Answer

b 1)

Given Budget is for 61000 units , we need to reframe budget by calculating all variable expenses at 59000 units level.

We will do this by dividing existing budgeted expenses with 61000 units, This will give us per unit variable cost.

Further multiplying variable costs with 59000 units we will get our flexible budget at 59000 units.

Now we can compare our budget and actual values

Actual Budget Per Unit Cost Flexible Budget Actual Difference Units 61000 units Cost / budgeted units 59000 units 59000 Units Budget - Actual Variable costs Cost / 61000 units Direct Material 49410 0.81 47790 48410 620 U Direct Labor 58560 0.96 56640 55570 1070 F Indirect Material 26230 0.43 25370 26400 1030 U Indirect Labor 24400 0.40 23600 23980 380 U Utilities 21350 0.35 20650 21160 510 U Maintenance 6100 0.10 5900 6290 390 U Total Variable 186050 3.05 179950 181810 1860 U

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