P22-3A Hill Company uses budgets in controlling costs. The August 2014 budget report for the company's Assembling Department is as follows.

Hill Company

Budget Report

Assembling Department

For the Month Ended August 31st 2014

Manufacturing Costs Budget Actual Favorable/Unfavorable 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 6,000 6,200 200 U Total Variable 165,000 161,000 4,000 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 200,000 196,000 4,000 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 presi- dent, 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) budget report for August using exible budget data. Why does this report provide a better basis for evaluating performance than the report based on static bud- get data?

(c) In September, 64,000 units were produced. Prepare the budget report using exible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) xed costs were the same in September as in August.