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Ratchet Company uses budgets in controlling costs. The August 2020 budget report for the companys Assembling Department is as follows. RATCHET COMPANY Budget Report Assembling

Ratchet Company uses budgets in controlling costs. The August 2020 budget report for the companys Assembling Department is as follows.

RATCHET COMPANY Budget Report Assembling Department For the Month Ended August 31, 2020

Difference

Manufacturing Costs

Budget

Actual

Favorable Unfavorable Neither Favorable nor Unfavorable

Variable costs
Direct materials

$50,020

$48,920

$1,100

Favorable
Direct labor

54,900

52,000

2,900

Favorable
Indirect materials

29,280

29,580

300

Unfavorable
Indirect labor

20,740

20,290

450

Favorable
Utilities

21,350

21,180

170

Favorable
Maintenance

7,320

7,590

270

Unfavorable
Total variable

183,610

179,560

4,050

Favorable
Fixed costs
Rent

12,800

12,800

0

Neither Favorable nor Unfavorable
Supervision

17,400

17,400

0

Neither Favorable nor Unfavorable
Depreciation

7,500

7,500

0

Neither Favorable nor Unfavorable
Total fixed

37,700

37,700

0

Neither Favorable nor Unfavorable
Total costs

$221,310

$217,260

$4,050

Favorable

The monthly budget amounts in the report were based on an expected production of 61,000 units per month or 732,000 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 59,000 units were produced.

(a) & (b)

(a) State the total monthly budgeted cost formula. (Round cost per unit to 2 decimal places, e.g. 1.25.)

The formula is $ + variable costs of $ per unit.

(b) Prepare a budget report for August using flexible budget data. (List variable costs before fixed costs.)

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