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 BAKERYBakery SalesActual CostsFor the Month Ending August 31ActualBudgetedDifferenceIngredientsFlour$ 4,000$ 3,780$ 220Butter3,6003,470130Oil1,8001,920(120)Fruit1,3501,045305Nuts92084080Chocolate820820-Other420305115Total ingredients$ 12,910$ 12,180$ 730LaborChannel manager$ 4,5504,550-Other10,80011,150(350)Utilities2,4752,355120Rent3,6753,675-Marketing225120105Total bakery costs$ 34,635$ 34,030$ 605Revenues$ 54,700$ 54,700-

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 $4,550 in August to $5,050 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 BAKERYBakery SalesActual CostsFor the Month Ending November 30ActualIngredientsFlour$ 5,100Butter4,740Oil2,125Fruit1,600Nuts1,250Chocolate1,080Other480Total ingredients$ 16,375LaborChannel manager$ 5,050Other14,260Utilities2,475Rent3,675Marketing225Total bakery costs$ 42,060Revenues$ 71,275

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?