P22-3A Hill Company uses budgets in controlling costs. The August 2014 budget report for the companys 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) Prepare a 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.