RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 31, 2020 Difference Favorable Unfavorable Neither Favorable nor Unfavorable Manufacturing Costs Budget Actual Variable costs Direct materials $ 50,740 $ 49,740 $1,000 Favorable Direct labor 54,280 51,480 2,800 Favorable Indirect materials 25,960 26,260 300 Unfavorable Indirect labor 22,420 21,940 480 Favorable Utilities 14,750 14,580 170 Favorable Maintenance 5,900 6,120 220 Unfavorable Total variable 174,050 170,120 3,930 Favorable Fixed costs Rent 10,000 10,000 -O- Neither Favorable nor Unfavorable Supervision 18,200 18,200 -0- Neither Favorable nor Unfavorable Depreciation 5,200 5,200 -O- Neither Favorable nor Unfavorable Total fixed 33,400 33,400 -0- Neither Favorable nor Unfavorable Total costs $207,450 $ 203,520 $3,930 Favorable The monthly budget amounts in the report were based on an expected production of 59,000 units per month or 708,000 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 57,000 units were produced. (a) & (b) Your answer is correct. (a) State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, eg. 1.25.) The formula is $ 33400 + variable costs of $ 2.95 per unit. (b) Prepare a budget report for August using flexible budget data. (List variable costs before fixed costs.) RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended August 31, 2020 Nei Budget Actual Costs ng Units 57000 57000 Variable Costs Direct Materials $ 49020 i $ 49740 i $ 720 i Direct Labor 52440 i 51480 i 960 Indirect Materials 25080 i 26260 i 1180 1 Indirect Labor 21660 i 21940 280 i Utilities 14250 i 14580 i 330 1 Maintenance 5700 i 6120 i 420 i Total Variable Costs 168150 170120 1970 Fixed Costs Rent 10000 i 10000 i 0 Supervision 18200 i 18200 i 0 Depreciation 5200 i 5200 i 0 Total Fixed Costs 33400 i 33400 i 0 Total Costs 201550 i 203520 1970 In September, 63,000 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. (List variable costs before fixed costs.) RATCHET COMPANY Assembling Department Flexible Budget Report For the Month Ended September 30, 2020 Nei na Budget Actual Costs Units 63000 63000 Variable Costs Direct Materials 53922 $ 54714 i -792 Direct Labor 57684 56628 i 1056 Indirect Materials 27588 28886 i - 1298 Indirect Labor 23826 24134 i -308 Utilities 15675 16038 00!!! i -363 Maintenance 6270 6732 i -462 Total Variable Costs 184965 187132 i -2167 Fixed Costs Rent 10000 i 10000 i Supervision 18200 i 18200 i Depreciation 5200 i 5200 i 1.0 Total Fixed Costs 33400 33400 i Total Costs $ 218365 $ 220532 i -2167