State total budgeted cost formula, and prepare flexible budget s for 2 time periods

Ratchet Company uses budgets in controlling costs. The August 2017 budget report for the company's Assembling

Department is as follows.

Ratchet Company

Budget Report

Assembling Department

For the Month Ended August 31, 2017

Difference

Favorable F

Manufacturing Cost

Budget

Actual

Unfavorable U

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

12,000

12,400

400

U

Total variable

171,000

167,200

3,800

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

$ 206,000

$ 202,200

$3,800

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 president, however, is unhappy with the results for August

because only 58,000 units were produced.

Instructions

1.	Assume that the number of units produced in September changed to 68,000. Revise
	the flexible budget report for September assuming (1) each variable cost was 12%
	higher than its actual cost in August and (s) fixed costs remain the same in September
	as in August.