Problem 1-49 (Algo) Cost Data for Managerial Purposes-Budgeting (LO 1-3) Assume that The AM Bakery is preparing a budget for the month ending November 30. Management prepares the budget by starting with the actual results for August that are shown below. Then, management considers what the differences in costs will be between August and November. THE AM BAKERY Bakery Sales Actual Costs Ingredients For the Month Ending August 31 Flour Butter 011 Fruit Nuts Chocolate Other Total ingredients Labor Channel manager Other Actual Budgeted Difference $ 4,120 3,720 $ 3,876 $ 244 3,554 166 1,920 2,064 (144) 1,410 1,099 311 944 888 844 844 444 311 133 $ 13,402 $ 12,636 $ 766 $ 4,610 4,610 10,920 11,450 (530) 2,565 2,421 144 3,765 3,765 255 144 $ 35,026 111 $ 491 Utilities Rent Marketing Total bakery costs Revenues $ 35,517 $ 57,700 $ 57,700 Management expects revenue in November to be 30 percent higher than in August, and it expects all ingredient costs (e.g., flour, butter, and so on) to be 25 percent higher in November than in August. Management expects "other" labor costs to be 30 percent higher in November than in August, partly because more labor will be required in November and partly because employees will get a pay raise. The manager will get a pay raise that will increase his salary from $4,610 in August to $5,110 in November. Rent, utilities, and Management expects revenue in November to be 30 percent higher than in August, and it expects all ingredient costs (e.g., flour, butter, and so on) to be 25 percent higher in November than in August. Management expects "other" labor costs to be 30 percent higher in November than in August, partly because more labor will be required in November and partly because employees will get a pay raise. The manager will get a pay raise that will increase his salary from $4,610 in August to $5,110 in November. Rent, utilities, and marketing costs are not expected to change. Now, fast-forward to early December and assume the following actual results occurred in November. THE AM BAKERY Bakery Sales Actual Costa For the Month Ending November 30 Ingredients Flour Butter 011 Fruit Nuts Chocolate Other Total ingredients Labor Channel manager Other Utilities Rent Marketing Total bakery costs Revenues Required Actual $ 5,280 4,908 2,239 1,660 1,310 1,140 504 $ 17,041 $ 5,110 14,428 2,565 3,765 255 $ 43,164 $75,205 Required: a. Prepare a statement that compares the budgeted and actual costs for November. b. 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? Required A Required B Prepare a statement that compares the budgeted and actual costs for November. Note: Negative amounts should be indicated by a minus sign. THE AM BAKERY Bakery Sales Actual and Budgeted Costs For the Month Ending November 30 Actual Budgeted Ingredients Flour $ 5,280 Butter 4,908 Oil 2,239 Fruit 1,660 Nuts Chocolate 1,310 1,140 504 $ 17,041 $ 16,753 Difference Other Total ingredients Labor Channel manager $ 5,110 Other 14,428 Utilities 2,565 Rent 3,765 Marketing 255 Total bakery costs $ 43,164 Revenues $ 75,205 Raquicoll A Required B > Required A Required Br 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? Cost items