Problem 22-3A Ratchet Company uses budgets in controlling costs. The August 2017

Question

Problem 22-3A 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 For the Month Ended August 31, 2017 Difference Unfavorable Neither Favorable nor Unfavorable Manufacturing Costs Budget Actual Variable costs Direct materials Direct labor Indirect materials Indirect labor Utilities Maintenance $50,020 $48,920 $1,100 Favorable 54,900 52,000 2,900 Favorable 29,280 29,580 300 Unfavorable 20,740 20,290 450 Favorable 21.350 21,180 170 Favorable 7,320 7,590 270 Unfavorable Total variable 183,610 179,560 4,050 Favorable Fixed costs Rent Supervision Depreciation 12,800 12,800 0-Neither Favorable nor Unfavorable 17.400 7,400 0 Neither Favorable nor Unfavorable 7,500 7,500 0- Neither Favorable nor Unfavorable 37,700 37,700 -0- Neither Favorable nor Unfavorable Total fixed Total costs $221,310 $217,260 S4,050 Favorable 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 partially correct. Try again. (a) State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.) The formula is - + variable costs of per unit.

Explanation / Answer

Total monthly budgeted cost formula is

$37,700 + $3.01 per unit  

Flexible budget for 59,000 units is:

Ratchet Company Flexible Budget Report Assembling Department For the month ended August 31, 2017 59,000 59,000 Manufacturing Costs Budget Actual Difference Favorable (F) or Unfavorable (U)? Variable costs: Direct materials 48,380 48,920 -540 U Direct labor 53,100 52,000 1100 F Indirect materials 28,320 29,580 -1260 U Indirect labor 20,060 20,290 -230 U Utilities 20,650 21,180 -530 U Maintenance 7,080 7,590 -510 U Total variable costs 177,590 179,560 -1970 U Fixed costs: Rent 12,800 12,800 0 Supervision 17,400 17,400 0 Depreciation 7,500 7,500 0 Total fixed costs 37,700 37,700 0 Total costs 215,290 217,260 -1970 U

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