Assume that The AM Bakery is preparing a budget for the month ending October 31. Management prepares the budget by starting with the actual results for August 31. Next, management considers what the differences in costs will be between August and October. Management expects revenue in October to be 15 percent more than in August, and it expects all ingredient costs (e.g., flour, butter, and so on) to be 15 percent higher in October than in August. Management expects "other" labor costs to be 20 percent higher in October than in August, partly because more labor will be required in October and partly because employees will receive a pay raise. The manager will receive a pay raise that will increase his salary from $4,700 in August to $5,220 in October. Rent, utilities, and marketing costs are not expected to change. THE AM BAKERY Bakery Sales Budgeted Costs For the Month Ending October 31 Actual Budgeted (August) (October) Ingredients Flour $ 4,100 Butter 3,700 Oil 1,900 Fruit 1,500 Nuts 1,100 Chocolate 900 Other 500 Total ingredients 13,700 Labor Channel manager $ 4,700 Other 10,900 Utilities 2,600 Rent 3.800 Rent 3,800 Marketing 300 Total bakery cost $ 36,000 Revenues 54.200