Colt Company uses budgets in controlling costs. The August 2011 budget report for the company's Assembling Department is as follows.

The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 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 58,000 units were produced.

Instructions
(a) State the total monthly budgeted cost formula.
(b) Prepare a budget report for August using flexible budget data. Why does this report provide a better basis for evaluating performance than the report based on static budget data?
(c) In September, 64,000 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.

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COLT COMPANY Budget Report Assembling Department For the Month Ended August 31, 2011 Difference Favorable F Unfavorable U Manufacturing Costs Variable costs Budget Actual Direct materials Direct labor Indirect materials Indirect labor Utilities Maintenance S 48,000 54,000 24,000 18,000 15,000 9,000 168,000 47,000 51,300 24,200 17,500 14,900 9,200 164,100 $1,000 F 2,700 F 200 U 500 F 100 F 200 U 3,900 F Total variable Fixed costs Rent Supervision Depreciation 12,000 17,000 7,000 36,000 $204,000 12,000 17,000 7,000 36,000 $200,100 Total fixed Total costs $3,900 F