Assume that The AM Bakery is preparing a budget for the month ending November $30.$ Management prepares the budget by starting with the actual results for August that are shown below. Then, management considers what the differences in costs will be between August and November.

THE AM BAKERY

Bakery Sales

Actual Costs

For the Month Ending August $31$

Current Budgeted Difference

Ingredients

Flour $ $3,900$ $ $3,700$ $ $200$

Butter $3,5003,400100$

Oil $1,7001,800(100)$

Fruit $1,3001,000300$

Nuts $900800100$

Chocolate $800800-$

Other $400300100$

Total ingredients $ $12,500$ $ $11,800$ $ $700$

Labor

Channel manager $ $4,5004500-$

Other $10,70010,900(200)$

Utilities $2,4002,300100$

Rent $3,6003,600-$

Marketing $200100100$

Total bakery costs $ $33,900$ $ $33,200$ $ $700$

Revenues $ $52,200$ $ $52,200-$

Management expects revenue in November to be $30$ percent higher than in August, and it expects all ingredient costs $($e$.$g$.,$ flour, butter, and so on$)$ to be $25$ percent higher in November than in August. Management expects $$other$$ labor costs to be $30$ percent higher in November than in August, partly because more labor will be required in November and partly because employees will get a pay raise. The manager will get a pay raise that will increase his salary from $$4,500$ in August to $$5,000$ in November. Rent, utilities, and marketing costs are not expected to change.

Now, fast$-$forward to early December and assume the following actual results occurred in November.

THE AM BAKERY

Bakery Sales

Actual Costs

For the Month Ending November $30$

Current

Ingredients

Flour $ $4,950$

Butter $4,600$

Oil $2,030$

Fruit $1,550$

Nuts $1,200$

Chocolate $1,030$

Other $460$

Total ingredients $ $15,820$

Labor

Channel manager $ $5,000$

Other $14,120$

Utilities $2,400$

Rent $3,600$

Marketing $200$

Total bakery costs $ $41,140$

Revenues $ $68,000$

Required:

Prepare a statement that compares the budgeted and actual costs for November.

Suppose that you have limited time to determine why actual costs are not the same as budgeted costs. Which three cost items would you investigate to see why actual and budgeted costs are different?