ratchet company uses budgets and controlling costs The August 2017 budget report for the company assembling department is as follows

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

RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 31, 2017 Difference Favorable F Unfavorable U Budget Actual Manufacturing Costs Variable costs Direct materials Direct labor Indirect materials Indirect labor Utilities Maintenance Total variable Fixed costs Rent Supervision Depreciation Total fixed Total costs $ 48,000 54,000 24,000 18,000 15,000 12,000 171,000 $ 47,000 51,200 24,200 17,500 14,900 12,400 167,200 $1,000 F 2,800 F 200 U 500 F 100 F 400 U 3,800 F 12,000 17,000 6,000 35,000 $206,000 12.000 17,000 6,000 35,000 $202,200 $3,800 F Instructions (a) State the total monthly budgeted cost formula. (b) Prepare a budget report for August using flexible budget data. Why does this report (b) Budget total costs provide a better basis for evaluating performance than the report based on static bud $200,300 get data? (c) In September, 64,000 units were produced. Prepare the budget report using flexible (c) Budget tot. costs $217,400 budget data, assuming (1) each actual variable cost was 10% higher than its actual Actual tot. costs $218,920 cost in August, and (2) fixed costs were the same in September as in August