Answered step by step
Verified Expert Solution
Question
1 Approved Answer
P10-3A State total budgeted cost formula, and prepare flexible budget s for 2 time periods Ratchet Company uses budgets in controlling costs. The August 2017
| P10-3A State total budgeted cost formula, and prepare flexible budget s for 2 time periods | ||||||||||||
| Ratchet Company uses budgets in controlling costs. The August 2017 budget report for the company's Assembling | ||||||||||||
| Department is as follows. | ||||||||||||
| Ratchet Company | ||||||||||||
| Budget Report | ||||||||||||
| Assembling Department | ||||||||||||
| For the Month Ended August 31, 2017 | ||||||||||||
| Difference | ||||||||||||
| Favorable F | ||||||||||||
| Manufacturing Cost | Budget | Actual | Unfavorable U | |||||||||
| Variable costs | ||||||||||||
| Direct materials | $ 48,000 | 47,000 | $1,000 | F | ||||||||
| Direct labor | 54,000 | 51,200 | 2,800 | F | ||||||||
| Indirect materials | 24,000 | 24,200 | 200 | U | ||||||||
| Indirect labor | 18,000 | 17,500 | 500 | F | ||||||||
| Utilities | 15,000 | 14,900 | 100 | F | ||||||||
| Maintenance | 12,000 | 12,400 | 400 | U | ||||||||
| Total variable | 171,000 | 167,200 | 3,800 | F | ||||||||
| Fixed costs | ||||||||||||
| Rent | 12,000 | 12,000 | 0 | |||||||||
| Supervision | 17,000 | 17,000 | 0 | |||||||||
| Depreciation | 6,000 | 6,000 | 0 | |||||||||
| Total fixed | 35,000 | 35,000 | 0 | |||||||||
| Total costs | $ 206,000 | $ 202,200 | $3,800 | F | ||||||||
| The monthly budget amounts in the report were based on an expected production of 60,000 units per month | ||||||||||||
| or 720,000 units 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 only 58,000 units were produced. | ||||||||||||
| Instructions | ||||||||||||
| (a) State the total monthly budgeted cost formula. | ||||||||||||
| (b) Prepare a budget report for August using flexible budget data. Why does this report provide a better | ||||||||||||
| basis for evaluating performance than the report based on static budget data? | ||||||||||||
| (c) In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming | ||||||||||||
| (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in | ||||||||||||
| September as in August. | ||||||||||||
| NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . | ||||||||||||
| (a) | State the total monthly budgeted cost formula. | |||||||||||
| Fixed cost | Value | + | variable cost of | Value | per unit | |||||||
| (b) | Prepare a budget report for August using flexible budget data. Why does this report provide a better | |||||||||||
| basis for evaluating performance than the report based on static budget data? | ||||||||||||
| RATCHET COMPANY | ||||||||||||
| Assembling department | ||||||||||||
| Flexible budget Report | ||||||||||||
| For the Month Ended August 31, 2017 | ||||||||||||
| Difference | ||||||||||||
| Budget at | Actual Costs | Favorable F | ||||||||||
| Units | 58,000 units | 58,000 units | Unfavorable U | |||||||||
| Variable costs | ||||||||||||
| Direct materials | ? | Value | ? | |||||||||
| Direct labor | ? | Value | ? | |||||||||
| Indirect materials | ? | Value | ? | |||||||||
| Indirect labor | ? | Value | ? | |||||||||
| Utilities | ? | Value | ? | |||||||||
| Maintenance | ? | Value | ? | |||||||||
| Total variable | ? | ? | ? | |||||||||
| Fixed costs | ||||||||||||
| Rent | Value | Value | ? | |||||||||
| Supervision | Value | Value | ? | |||||||||
| Depreciation | Value | Value | ? | |||||||||
| Total fixed | ? | ? | ? | |||||||||
| Total costs | ? | ? | ? | |||||||||
| (c) | In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming | |||||||||||
| (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in | ||||||||||||
| September as in August. | ||||||||||||
| RATCHET COMPANY | ||||||||||||
| Assembling department | ||||||||||||
| Flexible budget Report | ||||||||||||
| For the Month Ended September 30, 2017 | ||||||||||||
| Difference | ||||||||||||
| Budget at | Actual Costs | Favorable F | ||||||||||
| Units | 64,000 units | 64,000 units | Unfavorable U | |||||||||
| Variable costs | ||||||||||||
| Direct materials | ? | ? | ? | |||||||||
| Direct labor | ? | ? | ? | |||||||||
| Indirect materials | ? | ? | ? | |||||||||
| Indirect labor | ? | ? | ? | |||||||||
| Utilities | ? | ? | ? | |||||||||
| Maintenance | ? | ? | ? | |||||||||
| Total variable | ? | ? | ? | |||||||||
| Fixed costs | ||||||||||||
| Rent | Value | Value | Value | |||||||||
| Supervision | Value | Value | Value | |||||||||
| Depreciation | Value | Value | Value | |||||||||
| Total fixed | ? | ? | ? | |||||||||
| Total costs | ? | ? | ? | |||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Clinical Audit For Doctors
Authors: Dr. Bob Ghosh, Sir Liam Donalson, Dr. Chen Sheng Low, Margaret Keane, Dr. Bhoresh Dhamija
1st Edition
1906839018, 978-1906839017
