State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal
ID: 2557577 • Letter: S
Question
State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.)
(b) Prepare a budget report for August using flexible budget data. (List variable costs before fixed costs.)
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 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
$51,200
$50,200
$1,000
57,600
54,200
3,400
26,880
26,980
100
19,200
18,740
460
16,000
15,830
170
11,520
11,780
260
182,400
177,730
4,670
11,200
11,200
–0–
18,300
18,300
–0–
7,400
7,400
–0–
36,900
36,900
–0–
$219,300
$214,630
$4,670
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.
In September, 68,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August. (List variable costs before fixed costs.)
The formula is = $ + variable costs of $ per unit.Explanation / Answer
Answer:
a)
State the total monthly budgeted cost formula.
The formula
=
The formulla= Fixed cost + varable cost
The formulla = 36900 +182400/6400
The formulla = 36900 +2.85
______________________________________________________
2
RATCHET COMPANY
Flexible Budget
Assembling Department
For the Month Ended August 31, 2017
Difference
Favorable
Manufacturing Costs
Budget
Actual
Unfavorable
Units
68000
38000
Neither Favorable
nor Unfavorable
Variable costs
Direct materials
$54,400
$55,220
820
Unfavorable
Direct labor
$61,200
$59,620
$1,580
Favorable
Indirect materials
$28,560
$29,678
1118
Unfavorable
Indirect labor
$20,400
$20,614
214
Unfavorable
Utilities
$17,000
$17,413
413
Unfavorable
Maintenance
$12,240
$12,958
718
Unfavorable
Total variable
$193,800
$195,503
1703
Unfavorable
Fixed costs
Rent
11200
11200
–0–
Neither Favorable nor Unfavorable
Supervision
18300
18300
–0–
Neither Favorable nor Unfavorable
Depreciation
7400
7400
–0–
Neither Favorable nor Unfavorable
Total fixed
36900
36900
–0–
Neither Favorable nor Unfavorable
Total costs
$230,700
$232,403
1703
Unfavorable
Working notes for the above answer:
1
Budget at 68,000 Units
Direct Materials
($0.8 × 68,000) =
$54,400
Direct Labor
($0.9 × 68,000) =
$61,200
Indirect Materials
($0.442 × 68,000) =
$28,560
Indirect Labor
($0.30 × 68,000) =
$20,400
Utilities
($0.25 × 68,000) =
$17,000
Maintenance
($0.18 × 68,000) =
$12,240
The manager’s performance was slightly better in September than it was in August. However, each variable cost was slightly over budget again except for direct labor
2
Note that actual variable costs in September were 10% higher than the actual variable costs in August. Therefore to find the actual variable costs in September, the actual variable costs in August must be increased 10% as follows
August (actual)
September (actual)
Direct Materials
50200
× 110%
$55,220
Direct Labor
54200
× 110%
$59,620
Indirect Materials
26980
× 110%
$29,678
Indirect Labor
18740
× 110%
$20,614
Utilities
15830
× 110%
$17,413
Maintenance
11780
× 110%
$12,958
177730
$195,503
The formula
=
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