Problem 10-3A (Part Level Submission) RATCHET COMPANY Budget Report Assembling D
ID: 2578276 • Letter: P
Question
Problem 10-3A (Part Level Submission)
RATCHET COMPANY
Budget Report
Assembling Department
For the Month Ended August 31, 2017
Difference
Manufacturing Costs
Budget
Actual
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
$57,200
$56,100
$1,100
61,100
57,600
3,500
26,000
26,100
100
24,700
24,300
400
19,500
19,330
170
7,800
8,170
370
196,300
191,600
4,700
10,300
10,300
–0–
18,300
18,300
–0–
6,800
6,800
–0–
35,400
35,400
–0–
$231,700
$227,000
$4,700
(a) & (b)
RATCHET COMPANY
Assembling Department
Flexible Budget Report
For the Month Ended August 31, 2017
Difference
Budget
Actual Costs
Favorable
Unfavorable
Neither Favorable
nor Unfavorable
Problem 10-3A (Part Level Submission)
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
$57,200
$56,100
$1,100
Favorable Direct labor61,100
57,600
3,500
Favorable Indirect materials26,000
26,100
100
Unfavorable Indirect labor24,700
24,300
400
Favorable Utilities19,500
19,330
170
Favorable Maintenance7,800
8,170
370
Unfavorable Total variable196,300
191,600
4,700
Favorable Fixed costs Rent10,300
10,300
–0–
Neither Favorable nor Unfavorable Supervision18,300
18,300
–0–
Neither Favorable nor Unfavorable Depreciation6,800
6,800
–0–
Neither Favorable nor Unfavorable Total fixed35,400
35,400
–0–
Neither Favorable nor Unfavorable Total costs$231,700
$227,000
$4,700
FavorableThe monthly budget amounts in the report were based on an expected production of 65,000 units per month or 780,000 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 63,000 units were produced.
Explanation / Answer
(a) The total monthly budgeted cost formula is = $35400 + ($196300 / 65000 units) = $35400 + variable costs of $3.02 per unit
(b)
RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended August 31, 2017 Difference Budget Actual Costs Favorable / Unfavorable / Neither Favorable nor Unfavorable Units 63000 63000 Variable costs Direct materials 55440 56100 660 Unfavorable Direct labor 59220 57600 1620 Favorable Indirect materials 25200 26100 900 Unfavorable Indirect labor 23940 24300 360 Unfavorable Utilities 18900 19330 430 Unfavorable Maintenance 7560 8170 610 Unfavorable Total variable costs $ 190260 191600 1340 Unfavorable Fixed costs Rent 10300 10300 0 Neither Favorable nor Unfavorable Supervision 18300 18300 0 Neither Favorable nor Unfavorable Depreciation 6800 6800 0 Neither Favorable nor Unfavorable Total fixed costs $ 35400 35400 0 Neither Favorable nor Unfavorable Total costs $ 225660 227000 1340 UnfavorableRelated Questions
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