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 10 percent more than in August, and it expects all ingredient costs (e.g., flour, butter, and so on) to be 10 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 $6,200 in August to $6,870 in October. Rent, utilities, and marketing costs are not expected to change.

Required:

Prepare a budget for The AM Bakery for October.

THE AM BAKERY
Bakery Sales
Budgeted Costs
For the Month Ending October 31
	Actual	Budgeted
	(August)	(October)
Ingredients
Flour	$5,600
Butter	5,200
Oil	3,400
Fruit	3,000
Nuts	2,600
Chocolate	1,650
Other	1,250
Total ingredients	$22,700
Labor
Channel manager	$6,200
Other	12,400
Utilities	4,100
Rent	5,300
Marketing	1050
Total bakery cost	$51,750
Revenues	69,200