Management expects revenue to be $100$ percent greater in December than in August because of the holiday season. Management expects that all food costs $($e$.$g$.,$ flour, butter, and so on$)$ will be $120$ percent higher in December than in August because of the increase in sales and because prices for ingredients are generally higher in the high$-$demand holiday months. Management expects $$other$$ labor costs to be $130$ percent higher in December than in August, partly because more labor will be required in December and partly because employees will get a pay raise. The manager will get a pay raise that will increase his salary from $$4,580$ in August to $$5,080$ in December. Utilities will be $15$ percent higher in December than in August. Rent and marketing will be the same in December as in August.

Now, move ahead to January of the following year and assume the following actual results occurred in December.

THE AM BAKERY

Bakery Sales

Actual Costs

For the Month Ending December $31$

Actual

Ingredients

Flour $ $8,637$

Butter $7,852$

Oil $3,980$

Fruit $3,345$

Nuts $2,260$

Chocolate $1,620$

Other $858$

Total ingredients $ $28,552$

Labor

Channel manager $ $5,080$

Other $24,660$

Utilities $3,325$

Rent $3,620$

Marketing $234$

Total bakery costs $ $65,471$

Revenues $ $111,120$

Required:

Prepare a statement that compares the budgeted and actual costs.

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?