RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 3

Question

RATCHET COMPANY
Budget Report
Assembling Department
For the Month Ended August 31, 2017

Difference

Manufacturing Costs

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

$53,760

$52,760

$1,000

61,440

58,240

3,200

29,440

29,640

200

21,760

21,310

450

22,400

22,200

200

11,520

11,780

260

200,320

195,930

4,390

10,800

10,800

–0–

18,600

18,600

–0–

5,500

5,500

–0–

34,900

34,900

–0–

$235,220

$230,830

$4,390

RATCHET COMPANY
Assembling Department
Flexible Budget Report
For the Month Ended August 31, 2017

Difference

Budget

Actual Costs

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

RATCHET COMPANY
Assembling Department
Flexible Budget Report
For the Month Ended September 30, 2017

Difference

Budget

Actual Costs

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

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

Manufacturing Costs

Budget

Actual

Favorable
Unfavorable
Neither Favorable
nor Unfavorable

Variable costs    Direct materials

$53,760

$52,760

$1,000

Favorable    Direct labor

61,440

58,240

3,200

Favorable    Indirect materials

29,440

29,640

200

Unfavorable    Indirect labor

21,760

21,310

450

Favorable    Utilities

22,400

22,200

200

Favorable    Maintenance

11,520

11,780

260

Unfavorable       Total variable

200,320

195,930

4,390

Favorable Fixed costs    Rent

10,800

10,800

–0–

Neither Favorable nor Unfavorable    Supervision

18,600

18,600

–0–

Neither Favorable nor Unfavorable    Depreciation

5,500

5,500

–0–

Neither Favorable nor Unfavorable       Total fixed

34,900

34,900

–0–

Neither Favorable nor Unfavorable Total costs

$235,220

$230,830

$4,390

Favorable
The monthly budget amounts in the report were based on an expected production of 64,000 units per month or 768,000 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 62,000 units were produced.

Explanation / Answer

Answer:

1

Cost formula is

=Variable cost+ Fixed cost

=3.13 per unit +34900

=3.13*62000 +34900

2

RATCHET COMPANY

Fleaxible Budget Report

Assembling Department

For the Month Ended August 31, 2017

Difference

Flexible

Favorable

Manufacturing Costs

Budget

Actual

Unfavorable

Neither Favorable

nor Unfavorable

Variable costs

   Direct materials

52080

52760

680

Unfavorable

   Direct labor

59520

58240

1280

Favorable

   Indirect materials

28520

29640

1120

Unfavorable

   Indirect labor

21080

21310

230

Unfavorable

   Utilities

21700

22200

500

Unfavorable

   Maintenance

11160

11780

620

Unfavorable

      Total variable

194060

195930

1870

Unfavorable

Fixed costs

   Rent

10800

10800

–0–

Neither Favorable
nor Unfavorable

   Supervision

18600

18600

–0–

Neither Favorable
nor Unfavorable

   Depreciation

5500

5500

–0–

Neither Favorable
nor Unfavorable

      Total fixed

34900

34900

–0–

Neither Favorable
nor Unfavorable

Total costs

228960

230830

1870

Unfavorable

3

RATCHET COMPANY

Fleaxible Budget Report

Assembling Department

For the Month Ended August 31, 2017

Difference

Flexible

Favorable

Manufacturing Costs

Budget

Actual

Unfavorable

Neither Favorable

nor Unfavorable

Variable costs

   Direct materials

57120

58036

916

Unfavorable

   Direct labor

65280

64064

1216

favorable

   Indirect materials

31280

32604

1324

Unfavorable

   Indirect labor

23120

23441

321

Unfavorable

   Utilities

23800

24420

620

Unfavorable

   Maintenance

12240

12958

718

Unfavorable

      Total variable

212840

215523

2683

Unfavorable

Fixed costs

   Rent

10800

10800

–0–

Neither Favorable
nor Unfavorable

   Supervision

18600

18600

–0–

Neither Favorable
nor Unfavorable

   Depreciation

5500

5500

–0–

Neither Favorable
nor Unfavorable

      Total fixed

34900

34900

–0–

Neither Favorable
nor Unfavorable

Total costs

247740

250423

2683

Unfavorable

RATCHET COMPANY

Fleaxible Budget Report

Assembling Department

For the Month Ended August 31, 2017

Difference

Flexible

Favorable

Manufacturing Costs

Budget

Actual

Unfavorable

Neither Favorable

nor Unfavorable

Variable costs

   Direct materials

52080

52760

680

Unfavorable

   Direct labor

59520

58240

1280

Favorable

   Indirect materials

28520

29640

1120

Unfavorable

   Indirect labor

21080

21310

230

Unfavorable

   Utilities

21700

22200

500

Unfavorable

   Maintenance

11160

11780

620

Unfavorable

      Total variable

194060

195930

1870

Unfavorable

Fixed costs

   Rent

10800

10800

–0–

Neither Favorable
nor Unfavorable

   Supervision

18600

18600

–0–

Neither Favorable
nor Unfavorable

   Depreciation

5500

5500

–0–

Neither Favorable
nor Unfavorable

      Total fixed

34900

34900

–0–

Neither Favorable
nor Unfavorable

Total costs

228960

230830

1870

Unfavorable

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