Problem 10-3A a, b1, c (Part Level Submission) (Video)

Ratchet Company uses budgets in controlling costs. The August 2020 budget report for the companys Assembling Department is as follows.

RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 31, 2020
			Difference
Manufacturing Costs	Budget	Actual	Favorable Unfavorable Neither Favorable nor Unfavorable
Variable costs
Direct materials	$47,200	$46,200	$1,000	Favorable
Direct labor	53,100	50,500	2,600	Favorable
Indirect materials	23,600	23,700	100	Unfavorable
Indirect labor	17,700	17,300	400	Favorable
Utilities	14,750	14,650	100	Favorable
Maintenance	5,900	6,000	100	Unfavorable
Total variable	162,250	158,350	3,900	Favorable
Fixed costs
Rent	10,000	10,000	0	Neither Favorable nor Unfavorable
Supervision	16,000	16,000	0	Neither Favorable nor Unfavorable
Depreciation	5,000	5,000	0	Neither Favorable nor Unfavorable
Total fixed	31,000	31,000	0	Neither Favorable nor Unfavorable
Total costs	$193,250	$189,350	$3,900	Favorable

The monthly budget amounts in the report were based on an expected production of 59,000 units per month or 708,000 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 57,000 units were produced.

(a) & (b)

	Your answer is correct.

(a) State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.)

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(c) In September, 63,000 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 31000 2.75 + variable costs of $ per unit. (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, 2020 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Costs Units 57000 57000 Variable Costs Direct Materials 45600 46200 -600 Unfavorable Direct Labor 51300 50500 800 Favorable Indirect Materials 22800 23700 -900 Unfavorable Indirect Labor 17100 17300 -200 Unfavorable Utilities 14250 14650 -400|Unfavorable Maintenance 5700 6000 -300 Unfavorable Total Variable Costs 156750 158350 -1600 Unfavorable Fixed Costs Rent 10000 10000 Neither Favorable nor Unfavorable v Supervision 16000 16000 Neither Favorable nor Unfavorable v Depreciation 5000 5000 0 Neither Favorable nor Unfavorable Total Fixed Costs 31000 31000 Neither Favorable nor Unfavorable Total Costs 187750 189350 -1600 Unfavorable $ RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended September 30, 2020 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Budget Actual Costs >