Question
Ivanhoe Company uses budgets in controlling costs. The August 2022 budget report for the company's Assembling Department is as follows. Ivanhoe Company Budget Report Assembling
Ivanhoe Company uses budgets in controlling costs. The August 2022 budget report for the company's Assembling Department is as follows.
Ivanhoe Company Budget Report Assembling Department For the Month Ended August 31, 2022 | ||||
---|---|---|---|---|
Difference | ||||
Manufacturing Costs | Budget | Actual | Favorable Unfavorable Neither Favorable nor Unfavorable | |
Variable costs | ||||
Direct materials | $53,760 | $52,760 | $1,000 | Favorable |
Direct labor | 61,440 | 58,240 | 3,200 | Favorable |
Indirect materials | 29,440 | 29,640 | 200 | Unfavorable |
Indirect labor | 21,760 | 21,310 | 450 | Favorable |
Utilities | 22,400 | 22,200 | 200 | Favorable |
Maintenance | 11,520 | 11,780 | 260 | Unfavorable |
Total variable | 200,320 | 195,930 | 4,390 | Favorable |
Fixed costs | ||||
Rent | 10,800 | 10,800 | -0- | Neither Favorable nor Unfavorable |
Supervision | 18,600 | 18,600 | -0- | Neither Favorable nor Unfavorable |
Depreciation | 5,500 | 5,500 | -0- | Neither Favorable nor Unfavorable |
Total fixed | 34,900 | 34,900 | -0- | Neither Favorable nor Unfavorable |
Total costs | $235,220 | $230,830 | $4,390 | Favorable |
The monthly budget amounts in the report were based on an expected production of64,000units per month or768,000units 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 only62,000units were produced.
In September,68,000units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August. (List variable costs before fixed costs.)
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